Sri Lanka shares recover from 4-month closing low; rupee eases

Reuters: ** Sri Lankan shares rose on Thursday after declining for eight straight sessions to a four-month closing low in the previous day, as investors picked up beaten-down stocks ahead of an increase in liquidity, analysts said. 

** The rupee closed weaker with investors waiting for directions from next week’s budget and the outcome of talks between government authorities and the IMF, market sources said. 

** The Colombo Stock Exchange index closed 0.28 percent higher at 5,816.29, edging up from its lowest close since Oct. 25 hit on Wednesday. 

** The benchmark index declined 2.9 percent in February in its second straight monthly fall. 

** Turnover was 2.12 billion rupees ($11.78 million), more than twice last year’s daily average of 834 million rupees. 

** Sri Lanka has asked the IMF to extend a $1.5 billion loan by another year and relax its tight spending targets ahead of key elections, two government sources close to the negotiations told Reuters on Tuesday. 

** The rupee fell 0.61 percent to 179.95/180.15 per dollar, compared with Wednesday’s close of 179.85/95. 

** Finance Minister Mangala Samaraweera will present the 2019 budget on March 5. 

** Traders and investors are waiting to see how the market would react to the central bank’s surprise announcement on Friday of reducing commercial banks’ statutory reserve ratio (SRR) by 100 basis points after the effective date March 1, the sources said. 

** The decision will increase liquidity by around 60 billion rupees, the central bank said. 

** Foreign investors exited from government securities for the first time in five weeks in the week ended Feb. 20, with net sales of 1.5 billion rupees, the central bank’s latest data showed. 

** The rupee has climbed 1.5 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $1 billion sovereign bond in mid-January. 

** Worries over heavy debt repayment after the 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country struggled to repay its foreign loans. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

($1 = 179.9500 Sri Lankan rupees) 

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

Sri Lanka shares fall for 8th session ahead of budget

Reuters: ** Sri Lankan shares fell for an eighth straight session on Wednesday and the rupee closed weaker, with investors waiting for directions from next week’s budget and the outcome of talks between government authorities and the IMF, market sources said. 

** Sri Lanka has asked the IMF to extend a $1.5 billion loan by another year and relax its tight spending targets ahead of key elections, two government sources close to the negotiations told Reuters on Tuesday. 

** The rupee ended at 179.85/95 per dollar, compared with Tuesday’s close of 179.80/90. ** Finance Minister Mangala Samaraweera will present the 2019 budget on March 5. 

** Traders and investors are waiting to see how the market would react to the central bank’s surprise announcement on Friday of reducing commercial banks’ statutory reserve ratio (SRR) by 100 basis points after the effective date March 1, the sources said. 

** The central bank reduced the SRR to increase liquidity and spur credit growth as policymakers struggle to boost a faltering economic growth following a political crisis and a recent rate increase. 

** Foreign investors exited from government securities for the first time in five weeks in the week ended Feb. 20, with net sales of 1.5 billion rupees, the central bank’s latest data showed. 

** The rupee has climbed 1.5 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $1 billion sovereign bond in mid-January. 

** Worries over heavy debt repayment after the 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country struggled to repay its foreign loans. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

** The Colombo Stock Exchange index closed lower for an eighth straight session on Wednesday, shedding 0.38 percent to 5,799.98 - its lowest close since Oct. 25. 

** The benchmark index dropped 1.2 percent last week, recording its third straight weekly fall. It declined about 1 percent in January. 

** Turnover was 300.3 million rupees ($1.67 million), well below last year’s daily average of 834 million rupees.

($1 = 179.7000 Sri Lankan rupees) 

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

Sri Lanka stocks, rupee ease ahead of budget, IMF talks outcome

Reuters: ** Sri Lankan shares and the rupee closed weaker on Tuesday, with investors waiting for directions from next week’s budget and the outcome of talks between government authorities and the International Monetary Fund (IMF), market sources said. 

** Sri Lanka has asked the IMF to extend a $1.5 billion loan by another year and relax its tight spending targets ahead of key elections, two government sources close to the negotiations told Reuters on Tuesday. 

** The rupee ended at 179.80/90 per dollar, compared with Monday’s close of 179.70/80. 

** Finance Minister Mangala Samaraweera will present the 2019 budget on March 5. 

** Traders and investors are waiting to see how the market would react to the central bank’s surprise announcement on Friday of reducing commercial banks’ statutory reserve ratio (SRR) by 100 basis points after the effective date March 1, the sources said. 

** The central bank reduced the SRR to increase liquidity and spur credit growth as policymakers struggle to boost a faltering economic growth following a political crisis and a recent rate increase. 

** Foreign investors exited from government securities for the first time in five weeks in the week ended Feb. 20, with net sales of 1.5 billion rupees, the central bank’s latest data showed. 

** The rupee has climbed 1.6 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $1 billion sovereign bond in mid-January. 

** Worries over heavy debt repayment after the 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country struggled to repay its foreign loans. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

** The Colombo Stock Exchange index closed lower for a seventh straight session on Tuesday, shedding 0.07 percent to 5,822.27 - its lowest close since Oct. 25. 

** The benchmark index dropped 1.2 percent last week, recording its third straight weekly fall. It declined about 1 percent in January. 

** Turnover was 261.96 million rupees ($1.46 million), well below last year’s daily average of 834 million rupees.

($1 = 179.7000 Sri Lankan rupees) 

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

Sri Lanka stocks, rupee fall; budget, IMF talks outcome awaited

Reuters: ** Sri Lankan shares and the rupee closed weaker on Monday, with investors awaiting cues from next week’s budget and the outcome of talks between government authorities and the IMF, market source said. 

** The rupee ended at 179.70/80 per dollar, compared with Friday’s close of 179.40/80. 

** Finance Minister Mangala Samaraweera will present the 2019 budget on March 5. Government authorities are in discussion with the IMF to continue a $1.5 billion loan which was delayed after a political crisis unfolded in October. 

** Traders and investors are waiting to see how the market would react to the central bank’s surprise announcement on Friday of reducing commercial banks’ statutory reserve ratio (SRR) by 100 basis points after the effective date March 1, the sources said. 

** The central bank reduced the SRR to increase liquidity and spur credit growth as policymakers struggle to boost a faltering economic growth following a political crisis and a recent rate increase. 

** Foreign investors exited from government securities for the first time in five weeks in the week ended Feb. 20, with net sales of 1.5 billion rupees, the central bank’s latest data showed. 

** The local currency posted a loss of 0.4 percent last week after a similar dive in the previous week due to high dollar demand from importers and outflows from the stock market. 

** The rupee has climbed 1.6 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence after the country repaid a $1 billion sovereign bond in mid-January. 

** Worries over heavy debt repayment after the 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country struggled to repay its foreign loans. 

** Sri Lanka has raised its borrowing limit for dollar-denominated bonds to $3 billion and chosen seven lead managers to tap the international market as soon as possible, three government sources said last week. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

** The Colombo Stock Exchange index closed lower for a sixth straight session on Monday, shedding 0.2 percent to 5,826.26 - its lowest close since Oct. 25. 

** The benchmark index dropped 1.2 percent last week, recording its third straight weekly fall. It declined about 1 percent in January. 

** Turnover was 765.3 million rupees ($4.26 million), less than last year’s daily average of 834 million rupees.

($1 = 179.6000 Sri Lankan rupees) 

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

Sri Lanka rupee, stocks end largely flat after reserve ratio cut

Reuters: ** The Sri Lankan rupee and the main stock index ended little changed on Friday after the central bank surprisingly reduced commercial banks’ statutory reserve ratio (SRR) by 100 basis points with effect from March 1, market sources said. 

** Sri Lanka’s central bank reduced commercial banks’ statutory reserve ratio (SRR) by 100 basis points on Friday before the markets open in a surprise move to increase liquidity and spur credit growth as policymakers struggle to boost a faltering economic growth following a political crisis and a recent rate increase. 

** The rupee ended at 179.40/80, compared with Thursday’s close of 179.45/65. 

** The local currency posted a loss of 0.4 percent this week after a similar dive in the previous week due to high dollar demand from importers and outflows from the stock market. 

** The rupee climbed 1.8 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence in Sri Lanka after the country repaid a $1 billion sovereign bond in mid-January. 

** The bond market saw inflows of 3.3 billion rupees in the week ended Feb. 13, recording its fourth straight weekly inflow, the latest central bank data showed. 

** Worries over heavy debt repayment after a 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country is struggling to repay its foreign loans. 

** Sri Lanka has raised its borrowing limit for dollar-denominated bonds to $3 billion and chosen seven lead managers to tap the international market as soon as possible, three government sources said on Tuesday. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

** The Colombo Stock Exchange index ended 0.02 percent weaker at 5,837.72 on Friday, its lowest close since Oct. 26, and marked its fifth straight session of declines. 

** The benchmark index dropped 1.6 percent during the week, recording its third straight weekly fall. It declined about 1 percent in January. 

** The turnover was 489.3 million rupees ($2.73 million), near a half of last year’s daily average of 834 million rupees. 

** Foreign investors were net sellers of 300.2 million rupees worth of shares on Friday, extending the year-to-date net foreign outflow to 5.5 billion rupees worth of stocks, and 18.9 billion rupees since the political crisis began on Oct. 26, 2018.

($1 = 179.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez, Editing by Sherry Jacob-Phillips)

MTD Walkers (KAPI) on the verge of collapse suffers another Rs1.5bn quarterly loss

LBO – Continuing its seemingly endless spiral into the inevitable abyss, CSE listed construction firm MTD Walkers (KAPI) reported a loss of approximately Rs1.5bn for the quarter ended December 2018. Loss for the 9 months was well over Rs3bn after losses of over Rs2bn during the corresponding period in the prior year.

KAPI is left with only equity of Rs1.35bn having retained losses totalling Rs5.5bn on the balance sheet. This small amount of equity is supporting a balance sheet with liabilities in excess of Rs38bn, indicating that the company is likely teetering on the verge of a total collapse.

Moves have been afoot for a new investor to come in and take over the company, however those moves were blocked by an enjoining order in the Commercial High Court on application by several of Sri Lanka’s largest banks to whom the firm is in default.

A Hayleys (HAYL) subsidiary has also filed a winding up action against KAPI according to reporting by the DailyFT.

The woes of MTD Walkers are likely to be present throughout the construction industry which is being plagued by delayed payments and bad debts. Firms who are dealing with government contracts have also historically been hotbeds of waste and corruption.

Sri Lanka's Jetwing Symphony Hotels hit by forex loss

ECONOMYNEXT - Sri Lanka's Jetwing Symphony Plc reported a loss of 128.5 million rupees in the December 2018 quarter, up 20 percent from a year earlier, on a forex losses, though revenues grew.

The firm reported a loss of 26 cents per share for the quarter. In the nine months to December, the group reported a loss of 73 cents per share on total losses of 369 million rupees, up from 338 million rupees a year earlier.

In 2018, the rupee fell from 153 to 182 to the US dollar amid contradictory monetary and exchange rate policy. In the quarter, the rupee had fallen 7.9 percent.

In the peak December quarter, revenues grew 37 percent to 484 million rupees, and cost of sales grew 23 percent to 79.6 million rupees, helping gross profits grow 40 percent to 404 million rupees.

But forex losses grew to 98 million rupees from 2.5 million rupees, on a foreign exchange loan.

A political crisis had also hurt online bookings.

"Jetwing Colombo Seven and Jetwing Kaduruketha reported slight drops in their overall occupancy rates, due to a reduction in the number of online travel agency bookings and free independent tourist bookings,as a result of the political situation which prevailed in the country during the quarter," Jetwing Chairman Hiran Cooray told shareholders.

"However, the overall occupancy rates of the other properties saw a significant increase which is testament to the popularity of your Group’s hotels."

Construction of Jetwing Kandy Gallery is progressing with 80 percent of the sub-structure and 30 percent of the super structure completed, he said.

Sri Lanka’s Watawala Plantations December quarter net profit down 03-pct

ECONOMYNEXT – Sri Lanka’s Watawala Plantations, which now focuses on palm oil and dairy, having spun off its tea business, said net profit fell three percent to 196 million rupees in the December 2018 quarter from a year ago.

Earnings per share were 97 cents for the quarter with sales up 27 percent to 782 million rupees, according to interim accounts filed with the stock exchange. The share last traded at 20.60 rupees.

The accounts showed net profit from palm oil rose 22 percent to 249 million rupees in the December 2018 quarter while sales rose 34 percent to 293 million rupees.

Losses from the diary business rose slightly to 47 million rupees while sales more than doubled to 146 million rupees.

Quarterly net finance costs of Watawala Plantations more than doubled to almost 20 million rupees

EPS was 3.35 rupees in the nine months to December 2018 with net profit down 29 percent to 673 million rupees while sales fell 47 percent to 2.3 billion rupees

Watawala Plantations Managing Director Vish Govindasamy said in a note accompanying the accounts that production volumes increases along with selling prices supported profitability when compared to last year.

“Despite the volatility in the global palm oil prices, Watawala managed to maintain the selling prices as a result of signing of the forward contracts with buyers,” he said.

The quarterly performance of Watawala Dairy Limited showed continuous improvements, as the milk volume, prices and revenue increased significantly, Govindasamy said.

“The reported losses were lowered in comparison to the budget and the start-up losses which are well within the budgetary parameters, are regularly monitored and controlled by the company.”

The increased milk production from the cattle adding to the second lactation in the herd and the first lactation of 246 cattle imported from Australia in May 2018 mainly accounted for the volume increase, Govindasamy said.

In his outlook, Govindasamy said volatility in the global oil palm market will remain and the strengthening of the US dollar against the Lankan rupee will have mixed consequences for the industry.

“The dairy segment will further consolidate its operations with more focus on rationalising feed costs with the milk yields,” he said.

Sri Lanka's NDB net up 74.4-pct in December

ECONOMYNEXT - Sri Lanka's National Development Bank Plc (NDB) net profits in the December quarter grew 74.4 percent to 1.7 billion rupees from a year earlier with higher interest income, the firm said.

NDB's earnings per share for the quarter were 9.21 rupees, the bank said in its interim financial report. The firm's share closed 30 cents lower at 104.70 rupees on Monday.

For the year 2018, NDB's earnings per share was 28.67 rupees, with net profits growing 51 percent to 5.3 billion rupees from 2017.

The bank said its profitability was at the highest level in its 40-year history.

Interest income for the December quarter were 12.6 billion rupees, up 27.5 percent from a year earlier, while interest expenses were up 24.4 percent to 8.4 billion rupees and net interest income was up 34 percent to 4.3 billion rupees.

Other operating income grew 317 percent to 836.6 million rupees.

Individla impairment against bad loans grew 384.5 percent to 1.1 billion rupees.

The bank said this was due to precautionary provisions made for some loans under a new futuristic model mandated in new accounting standards, compared to the earlier incurred loss model.

NDB's loan book as at December 31, 2018 was 344.6 billion rupees, up 26 percent from a year earlier.

Bad loans grew to 2.85 percent from 1.83 percent. NDB said this was lower than the industry average of 3.4 percent for 2018.

Deposits grew 27 percent to 347.2 billion rupees.

NDB's net assets per share were 185.63 rupees, down 4 percent from a year earlier. Total assets grew 23 percent from a year earlier to 478.5 billion rupees.

The bank's tier 1 capital ratio was 10.44 percent in 2018, down from 10.49 percent in 2017, against a regulatory requirement of 7.875 percent.

Total capital ratio fell to 13.67 percent from 15.18 percent a year earlier, with a regulatory minimum of 11.875 percent.

ETI asset sale: Sri Lanka CB says did not select buyer, only asked extra US$15mn

ECONOMYNEXT - Sri Lanka's Central Bank said it did not select a buyer for the assets of troubled ETI Finance Ltd, but only made the selected buyer pay 15 million US dollars more than originally offered.

The regulator said under the process decided by the Monetary Board (MB) of the Central Bank, all negotiations for the sale of assets were carried out by the Board of Directors of ETI Finance Ltd.

"As such, all requests made to invest and/or purchase assets of ETIF were directed to the company," the central bank said in a statement.

"Accordingly, selection of a party to whom the assets of ETIF were to be transferred was done by the Board of Directors (BOD) of ETIF, and the MB only granted necessary approvals from the perspective of protecting the depositors’ interests, subject to various conditions including carrying out the transaction in compliance with all the applicable laws and regulations in the country."

The Central Bank said there had been bids ranging from 61 million US dollars to 75 million US dollars.

ETIF had selected the current buyer, and the Monetary Board had demanded that the buyer pay 15 million US dollars more before giving approval. The next highest bidder had offered 61 million US dollars.

"CBSL at all times insisted on carrying out the transaction within applicable laws and regulations," the regulator said.

"As such, each tranche of the transaction, which was channelled to ETIF through reputed banking channels was approved by CBSL subsequent to the relevant banks clearing the funds through enhanced due diligence conducted as per applicable laws and regulations."

Out of the 75 million US dollars, 54 million dollars had come so far, which was used to repay 20 percent of the deposits of the company. Another 16 million dollars, which had been delayed due to unspecified reasons, had been expected in February, the regulator said.

Sri Lanka’s Hayleys December quarter net profit up 147-pct

ECONOMYNEXT – Sri Lanka’s Hayleys group said net profit shot up 147 percent to 439 million rupees in the December 2018 quarter from a year ago.

Group sales rose 20 percent in the quarter to almost 60 billion rupees, interim accounts filed with the stock exchange showed.

December quarter earnings per share were 5.86 rupees. Hayleys share price closed unchanged at 184.60 rupees Monday.

December quarter gross profit was up 15 percent to 13 billion rupees.

The accounts showed a sharp rise in net finance costs which went up 37 percent to 2.7 billion rupees during the quarter.

EPS for the nine months to December 2018 was 46 cents with net profit down 82 percent to 35 million rupees and sales up 45 percent to 163 billion rupees.

Hayleys said in a statement the group’s nine months operating profit rose 68 percent to 11.3 billion rupees.

“However, the net finance cost increased to 7.7 billion rupees from 3.9 billion rupees with the inclusion of Singer Group’s finance cost and the cost of funding recent acquisitions,” it said.

Hayleys chairman and ehief executive Mohan Pandithage said their recent acquisition of Singer (Sri Lanka) helped enhance the group’s retail sector profits.

“Further, the outstanding performances in our export businesses, increased volume in the transportation and logistics sector also have contributed well to the group’s bottom line.”

Sri Lanka’s Aitken Spence Hotel Holdings December net up 38.5-pct

ECONOMYNEXT – Sri Lanka’s Aitken Spence Hotel Holdings said net profit rose 38.5 percent to 339 million rupees in the December 2018 quarter from a year ago.

Sales rose eight percent to 4.9 billion rupees over the period, interim accounts filed with the stock exchange showed.

Earnings per share for the December quarter were one rupee. The share closed unchanged at 26.10 rupees Monday.

The Aitken Spence Hotel Holdings group made a loss per share of 26 cents for the nine months to December 2018 with a net loss of 76 million rupees on sales of 12.4 billion rupees.

Six months of the period under review relates to the off season of the tourism industry both in Sri Lanka and overseas where the group operates, a note to the accounts said.

The group’s Sri Lankan hotels made a loss of 115 million rupees during the period while its overseas resorts, in the Middle East, Maldives and India, made a profit of 319 million rupees, lower than the year before.

Sri Lanka's Royal Ceramics December quarter profit down 8.6-pct

ECONOMYNEXT – Net profits at Sri Lanka's Royal Ceramics group fell 8.6 percent to 814 million rupees in the December 2018 quarter from a year ago, as costs rose despite lower tax expenses, interim accounts showed.

Total quarterly sales of the group, part of Vallibel One group, rose 8.2 percent 10.5 billion rupees, according to the accounts filed with the stock exchange.

Quarterly earnings per share were 7.34 rupees.

Shares of Royal Ceramics group, which enjoys protective import tariffs on their ceramic products, were trading at 72.10 Monday morning, up 40 cents or 0.6 percent.

In the nine months to December 2018, EPS was 14.47 rupees, with net profit down 23 percent to 1.6 billion rupees while sales were up eight per cent to 25.6 billion rupees.

The accounts showed finance expenses rose 59 percent to 590 million rupees in the December 2018 quarter.

The Royal Ceramics group includes sanitaryware maker Rocell Bathware Limited and the tile manufacturers, Lanka Tiles and Lanka Walltiles.

Group tax costs fell 39 percent to 244 million rupees in the December quarter.

Sri Lanka’s Renuka Agri Foods back in profit as nut prices fall

ECONOMYNEXT - Renuka Agri Foods, a Sri Lankan manufacturer of coconut-based food and beverage products, swung back into the black with net profit of 61 million rupees in the December 2018 quarter from a loss of 58 million rupees the year before.

The company’s sales fell 27 percent to 495 million rupees in the quarter, interim accounts filed with the Colombo stock exchange showed.

Cost of sales also fell – down 46 percent to 349 million rupees – with gross profit up 248 percent to 146 million rupees.

Renuka Agri Foods reported earnings per share of 11 cents in the December 2018 quarter.

Renuka Agri Foods shares were trading at 2.30 rupees Thursday morning, down 10 cents or 4.17 percent.

EPS for the nine months to December 2018 were 26 cents with net profit of 146 million rupees.

Renuka Agri Foods Director Executive Shamindra Rajiyah attributed the recovery to lower prices of coconut.

“The gross profit margin has improved significantly in comparison to previous year same quarter mainly due to decrease in coconut prices,” he told shareholders.

“The manufacturing sector continued to be the main contributor to revenue for the period under review by achieving a turnover of 1,967 million rupees.

Sri Lanka's Lanka Tiles December quarter net profit down 52-pct

ECONOMYNEXT - Sri Lanka's Lanka Tiles said group net profits fell 52 percent to 167 million rupees in the December 2018 quarter from a year ago as costs rose although tax expenses were lower.

Interim financial results filed with the stock exchange showed group sales rose 17 percent to 2.7 billion rupees in the period with exports down.

Cost of sales rose 42 percent to 1.7 billion rupees, the accounts showed, with gross profit down 14.7 percent to 630 million rupees.

Lanka Tiles group, which benefits from high import tariffs on tiles, reported sharply lower profits from associate firms in the group while finance costs went up and tax costs halved to 47 million rupees.

December 2018 quarter earnings per share were 3.15 rupees. Lanka Tiles shares closed at 74.10 rupees Friday, down 60 cents or 0.8 percent.

Lanka Tiles’ EPS for the nine months to December 2018 was 6.70 rupees with net profit at 355 million rupees on sales of 6.1 billion rupees.

Sri Lanka's Sunshine Holdings net up 53-pct in Dec

ECONOMYNEXT - Sri Lanka's Sunshine Holdings Plc, said profits grew 53 percent in the December 2018 quarter helped by consumer goods and hydro power.

The group reported earnings of 1.85 rupees per share for the quarter in interim accounts filed with the Colombo Stock Exchange. For the nine months to December, earnings were 4.87 rupees per share on total profits of 721 rupees, which were flat.

Revenues grew 11 percent to 5.7 billion rupees, cost of sales grew 10 percent to 4.1 billion rupees and gross profits grew 12 percent to 1.6 billion rupees.

In the quarter, net finance costs rose to 68 million rupees from 36 million a year earlier.

Managing director Vish Govindasamy sad consumer goods grew 13.9 percent in the 9 months from a year earlier with profits growing 90 percent. Healthcare revenues grew 12.8 percent but margins were trimmed due to price controls and currency depreciation.

Hydro power revenues had increased to 311 million rupees from 107 million and profits were up three fold to 165 million rupees from 57 million rupees. 

Sri Lanka's Lion Brewery upgraded to 'AA-(lka)' by Fitch

ECONOMYNEXT - Sri Lanka's Lion Brewery Plc, has been upgraded to 'AA-(lka)' by Fitch Ratings as cashflows improved with rising sales, after taxes which accelerated over hard liquor were halted, despite a recalibration of the local rating scale downwards.

"Lion's cash flows have improved, helped by a recovery in sales, which was supported by a reversion in the excise duty regime to tax drinks with lower alcohol content at reduced rates compared with spirits," the rating agency said.

"The increased penetration of beer per capita also supports stronger sales.

"At end-September 2018, Lion's latest trailing 12- month net leverage was 1.0x. Lion's business risk profile has also benefitted from the management's efforts to mitigate the flood risk at its main production facility."

"Domestic alcoholic beverage producers face frequent revisions to excise duties, which cause significant operating cash flow volatility.

"In 2015, the government increased the excise duties on alcohol twice, which led to tax on strong beer overtaking the tax on hard liquor on an equivalent-alcohol basis.

"The situation was reversed after 24 months, which resulted in hard liquor being taxed at 34% more than strong and mild beer on an equivalent-alcohol basis.

The full statement is reproduced below:

LION BREWERY (CEYLON) PLC:

The upgrade of Lion's National Long-Term Rating reflects the recalibration of the Sri Lankan
national scale ratings as well as our view that Lion will maintain its leverage - net adjusted debt
/ EBITDAR - in line with a 'AA-(lka)' rating.

Lion's cash flows have improved, helped by a
recovery in sales, which was supported by a reversion in the excise duty regime to tax drinks
with lower alcohol content at reduced rates compared with spirits.

The increased penetration of beer per capita also supports stronger sales. At end-September 2018, Lion's latest trailing 12- month net leverage was 1.0x. Lion's business risk profile has also benefitted from the management's efforts to mitigate the flood risk at its main production facility.

Fitch rates Lion on its standalone strength due to weak linkages between Lion and its stronger
ultimate parent, Carson Cumberbatch PLC, as defined in Fitch's Parent and Subsidiary Rating
Linkage criteria. Lion's rating reflects its leading market position in the domestic beer industry,
which is protected by stringent regulation, its well-established brand and extensive retail
coverage. However, the domestic excise tax regime on alcoholic beverage sales changes
frequently, which inhibits the industry's profitability.

Recovery in Sales Volume: Fitch expects Lion's sales to improve in the medium term after excise
duties were revised to tax manufacturers of spirits at higher rates than beer and wine makers.
The government taxes a litre of strong beer at LKR2,455 compared with LKR3,300 for spirits,
effective from 10 November 2017. The current tax regime is more consistent with the practice
that prevailed before November 2015, when drinks with lower alcohol content such as beer
were taxed at lower rates than spirits. Lion's sales volumes were depressed from November
2015 to October 2017 when a litre of strong beer was taxed at LKR3,580, higher than spirits'
LKR3,246. Fitch expects the current regime, with lower taxes on beer than spirits, to prevail
over the medium term.

Balance Sheet to Strengthen: We believe Lion's net leverage will remain below 1.5x in the
medium term, mainly due to healthy profitability and a likely reduction in capex compared with
past years. The company has sufficient brewing capacity for the next few years following the
expansion in its production capacity, which drove the high capex from FY14-FY16.
Improving EBITDAR Margin: Fitch expects Lion's EBITDAR margins to stabilise at around 29% from
FY20, from 27% in FY18, supported by better sales and operating conditions. Lion's EBITDAR
margin recovered significantly to around 38% by 1H19 from a low of 19.5% in FY17 when
manufacturing was halted temporarily due to floods and Lion had to import inventory at a
higher cost. The margin recovery was driven by the company's efforts to recoup some of the lost
sales volumes and operational efficiencies that reduced costs.

Market Leadership: Lion is the largest beer manufacturer in Sri Lanka, with significant market
share in the domestic beer market. Lion consolidated its market leadership in FY18 by regaining
the shelf space it lost in FY17 due to the temporary halt in production following floods in May
2016. Lion's strong market share is supported by its entrenched brand and widespread retail
coverage, with access to 2,800 retail outlets around Sri Lanka. The company's market position is
protected to some extent by regulations in the form of stringent restrictions on advertising and
limited issuance of new retail licenses.

High Regulatory Risk: Domestic alcoholic beverage producers face frequent revisions to excise
duties, which cause significant operating cash flow volatility. In 2015, the government
increased the excise duties on alcohol twice, which led to tax on strong beer overtaking the tax
on hard liquor on an equivalent-alcohol basis. The situation was reversed after 24 months,
which resulted in hard liquor being taxed at 34% more than strong and mild beer on an
equivalent-alcohol basis. We believe any further tax increases will be gradual, considering the
importance of the industry to government coffers. Excise duties from alcoholic-beverage
makers made up 7% of government tax revenue in 2017.

Sri Lanka Telecom rating downgrade follows sovereign: Fitch

ECONOMYNEXT - Credit ratings agency Fitch said it has downgraded the state-owned Sri Lanka Telecom Plc (SLT) and its debentures to 'AA+ (lka)' from 'AAA (lka)' following a recaliberaltion of local ratings following a recent downgrade of the sovereign to 'B' from 'B+'.

Fitch Ratings said SLT will have negative cash flow over the next financial year as it makes capital expenditure to expand fibre infrastructure and its 4G mobile network.

"We expect revenue to grow by a mid-single-digit percentage during 2019-2020 (barring any tax shocks), driven by data and fixed-broadband growth," Fitch Ratings said.

It also said the recent merger of Hutchison Telecommunications Lanka (Private) Ltd and Etisalat Lanka (Private) Ltd is likely to reduce competitive pressure on SLT.

The full Fitch Ratings statement follows:

Fitch Ratings has taken rating action on non-financial corporates following the recalibration of its Sri Lankan National Rating scale to reflect changes in the relative creditworthiness among the country's issuers following the downgrade of the sovereign rating to 'B' from 'B+' on 3 December 2018.

For details, see https://www.fitchratings.com/site/pr/10061317 Fitch Ratings: Recalibration of Sri Lanka National Rating Scale, dated 4 February 2019.

National scale ratings are a risk ranking of issuers in a particular market designed to help local investors differentiate risk. Sri Lanka's national scale ratings are denoted by the unique identifier '(lka)'.

Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale. National scales are not comparable with Fitch's international ratings scales or with other countries' national rating scales.

KEY RATING DRIVERS

SRI LANKA TELECOM PLC:
Sovereign Downgrade: The downgrade of SLT's National Long-Term Rating to 'AA+(lka)' from 'AAA(lka)' reflects the downgrade of the sovereign's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B' from 'B+' with a Stable Outlook.

Simultaneously, Fitch has downgraded the national rating on SLT's LKR7 billion senior unsecured debt programme to 'AA+(lka)' from 'AAA(lka)'.

SLT's ratings are constrained by the sovereign as per Fitch's Parent and Subsidiary Rating Linkage criteria.

We assess the relationship between the sovereign and SLT as one of a weaker parent and stronger subsidiary with strong operational and strategic linkages.

The state holds a majority stake in SLT directly and indirectly, and exercises significant influence on its operating and financial profile.

SLT's second-biggest shareholder, Malaysia's Usaha Tegas Sdn Bhd at 44.9%, has no special provisions in its shareholder agreement to dilute the government's significant influence over SLT.

High Capex, Negative FCF: We expect SLT to have negative free cash flow (FCF) during 2019-2020 (estimated 2018 negative FCF of LK2 billion-3 billion) as cash flow from operations could be insufficient to fund capex requirements to expand the fibre infrastructure and 4G mobile networks.

We expect SLT's 2019 capex to remain high, at around 28%-30% of group revenue (2018 estimated: 30%), as it aims to complete its 4G population coverage to around 95% by end-2019.

However, management expects its capex/revenue to decline to around 18%-20% in 2019.

We expect SLT to continue to invest in expanding fibre coverage as it aims to connect about 1 million homes by 2020-2021, from the 70,000 homes currently enabled.

SLT would typically need to lay fibre for at least 2 million homes for half of the households to be connected.

We expect SLT's fibre investments to have low returns due to the country's low broadband tariffs. Dividends are likely to remain around LKR1.6 billion-1.8 billion in the next two to three years.

Data-Driven Growth: We expect revenue to grow by a mid-single-digit percentage during 2019-2020 (barring any tax shocks), driven by data and fixed-broadband growth.

We expect 4G smartphone penetration to improve from the current 25% with the proliferation of cheaper Chinese phones.

Revenue rose strongly by 6.5% in the first nine months of 2018, driven by fixed-broadband and mobile usage after a temporary usage slump in 2017 due to higher taxes on voice and data. We expect the government's recent announcement on the removal of floor rates for voice call charges to have only a limited impact on growth.

Industry Consolidation: We believe the recently announced merger between Hutchison Telecommunications Lanka (Private) Ltd and Etisalat Lanka (Private) Ltd is likely to relieve some competitive pressures that have undermined telecom companies' revenue and EBITDA growth in recent years. The merger is pending regulatory approval.

Industry consolidation is likely to provide some relief from pricing pressure, especially in the data segment where telcos have not been able to fully capture the strong growth in data traffic.

Stable Sector Outlook: Fitch's outlook for the Sri Lankan telco sector is stable as we expect the mean net leverage for SLT and mobile market leader, Dialog Axiata PLC (AAA(lka)/Stable), to remain stable at around 1.4x in 2019.

We expect the sector's cash generation to improve, driven by higher mobile and broadband data usage, which will be insufficient, however, to fund the large capex requirement, leading to negative FCF.

We also expect average operating EBITDAR margins to remain stable at around 34% (2018 estimate: 34%), driven by improving economies of scale in the data and home broadband segment, offsetting the negative impact of the changing revenue mix.

DERIVATION SUMMARY

SLT's unconstrained standalone credit profile is stronger than that of the government of Sri Lanka, reflecting the company's market leadership in fixed-line services and second-largest position in mobile, along with its ownership of an extensive optical-fibre network.

The standalone profile is also underpinned by its mid-single-digit percentage growth prospects, moderate estimated 2018 FFO adjusted net leverage of 1.7x and stable operating EBITDAR margin.

SLT has lower exposure to the crowded mobile market and more diverse service platforms than mobile-market leader Dialog. However, Dialog has a larger revenue base, better operating EBITDAR margins, lower forecast FFO adjusted net leverage and a better FCF profile than SLT.

KEY ASSUMPTIONS
- Revenue to grow by a mid-single-digit percentage, driven by fixed-broadband and mobile-data services in 2018-2019.
- Capex/revenue to remain high at around 28%-30% as SLT expands its fibre and 4G network.
- Operating EBITDAR margin to remain stable at around 29%-30%.
- Effective tax rate of 28%.
- Dividend payout of LKR1.6 billion-1.8 billion per year.

RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to Positive Rating Action
- An upgrade in the Sri Lankan sovereign's Long-Term IDR would result in an upgrade on SLT's National Long-Term Rating

Developments that May, Individually or Collectively, Lead to Negative Rating Action
- A downgrade in the Sri Lankan sovereign's Long-Term IDR would result in a downgrade on SLT's National Long-Term Rating

LIQUIDITY AND DEBT STRUCTURE

Strong Access to Local Banks: At end-September 2018, SLT's liquidity - cash of LKR12 billion and committed undrawn bank lines of LKR13.5 billion - was sufficient to fund its short-term debt of LKR13.5 billion. We expect SLT to refinance its short-term debt in light of its access to local banks. It has demonstrated a solid track record of accessing capital from local banks and capital markets.

Sri Lanka's NSB local rating downgraded after re-calibration

ECONOMYNEXT - Fitch Ratings has downgraded the state-run National Savings Bank to 'AA+(lka)' from 'AAA(lka)' following a downgrade of the government's rating to 'B' from 'B+' which led to a compression of its domestic rating scale towards the lower end.

Fitch said earlier this month that it may not be able to give 'AAA(lka)' as many Sri Lankan firms as ealier as the sovereign rating fell to two notches above CCC.

"The revision reflects the change in the relative ranking of NSB's national rating compared with other Fitch-rated Sri Lankan issuers," Fitch said.

"This is a result of the sovereign's weakened ability to provide support to NSB, which acts as a constraint on the bank's rating, even though the sovereign's propensity to support the bank remains intact."

Sri Lanka's sovereign rating has steadily fallen from BB- to B amid a large public service, loss-making state enterprises, renewed expropriation, foreign borrowing, and currency depreciation.

The full statement is reproduced below:

Fitch Revises NSB's National Rating on Sri Lanka National Scale Recalibration

Fitch Ratings-Colombo-15 February 2019: Fitch Ratings has revised the National Long-Term Rating of National Savings Bank (NSB) to 'AA+(lka)' from 'AAA(lka)'. The Outlook is Stable. This follows the recalibration of the Sri Lankan National Rating scale after the sovereign's Long-Term Foreign-Currency Issuer Default Rating was downgraded to 'B' from 'B+' with a Stable Outlook on 3 December 2018 (see our commentary Fitch Ratings: Recalibration of Sri Lanka National Rating Scale published 4 February 2019 on www.fitchratings.com).

The rating action is not related to NSB's credit quality but reflects Fitch's changes to the Sri Lankan national rating scale.

National scale ratings are a risk ranking of issuers in a particular market designed to help local investors differentiate risk. Sri Lanka's national scale ratings are denoted by the unique identifier '(lka)'. Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale. National scales are not comparable with Fitch's international rating scales or with other countries' national rating scales.

Other Sri Lankan financial institutions' national ratings, which are not mentioned in this commentary, have not been affected by the recalibration exercise.

Key Rating Drivers

The revision reflects the change in the relative ranking of NSB's national rating compared with other Fitch-rated Sri Lankan issuers. This is a result of the sovereign's weakened ability to provide support to NSB, which acts as a constraint on the bank's rating, even though the sovereign's propensity to support the bank remains intact.

The National Long-Term Rating of NSB continues to reflects Fitch's expectation of extraordinary support from the sovereign due to the bank's policy mandate of mobilising retail savings and investing them primarily in government securities.

Rating Sensitivities

NSB's National Rating is sensitive to changes in the relative creditworthiness among Sri Lankan issuers and the level of the country's sovereign rating.

National Savings Bank; National Long Term Rating; Revision Rating; AA+(lka).

Sri Lanka's CTC net up 15-pct; says beedi boom amid tax hikes

ECONOMYNEXT - Sri Lanka's Ceylon Tobacco Company Plc (CTC), a unit of British American Tobacco, said net profits for the December 2018 quarter grew 15.7 percent to 5.2 billion rupees, despite a tax-driven price increase in August that reduced volumes.

The firm reported earnings of 28.11 rupees per share for the quarter. In the year to December, the firm reported earnings of 90.77 rupees on total profits of 17.04 billion rupees, up from 14.5 billion rupees a year earlier.

Ceylon Tobacco said revenues with taxes grew 7.5 percent to 37.8 billion rupees, turnover taxes grew 6.1 percent to 29.1 billion rupees, and net revenues grew 12.8 percent to 8.6 billion rupees.

After a tax and price hike in August, the CTC said volumes fell 3.2 percent.

For 2018, the firm claimed a boom in 'beedi' to 4.8 billion sticks a year, a steep increase from last year's numbers, amid a weak economy.

In 2017, the CTC said legal tax-paid cigarettes comprised 3.15 billion sticks and beedi was 3.78 billion sticks.

For the full year, the CTC said its volumes were flat.

Smuggled cigarettes were estimated at 460 million with 51 million sticks caught in raids. The firm estimates smuggled cigarettes at 10 times the detected volumes.

Sri Lanka's Dialog Axiata profits wiped out in kitchen sink quarter

ECONOMYNEXT - Sri Lanka's Dialog Axiata Plc reported losses of 2.5 billion rupees at company level and was barely in the black at group level as the firm threw in write-downs on top of forex losses and a write-back into the December 2018 quarter.

The group reported earnings of 01 cent for the quarter, down from 39 cents a year earlier. For the year to December 2018, the group reported earnings of 92 cents per share, on total profits of 7.56 billion rupees, down from 11.04 billion a year earlier.

The stock closed at 9.90 rupees on February 15.

The firm has operations in mobile. fixed wireless, and pay TV.

In the quarter, revenues grew 14.9 percent from a year earlier to 28.5 billion rupees, and operating costs grew 29 percent to 15.87 billion rupees, while gross profits grew at a slower 2.9 percent to 12.6 billion rupees.

Administration costs doubled to 9.0 billion rupees to 4.4 billion rupees.

The firm said it wrote off costs of "digitalization of business activities" to "fully leverage on capabilities of digital platforms and technologies," which it started in 2017, during the last quarter of the year.

The write-off was taken as forex losses soared in the quarter when Sri Lanka's soft-peg with the US dollar failed and the rupee tumbled in 2018 once again.

Finance costs rose to 2.9 billion rupees in the quarter from 530 million rupees a year earlier.

The 'kitchen sink' quarter will help the group start the next financial year without being dragged down by past events, analysts say.

The firm also wrote back 3.6 billion rupees as Sri Lanka's Supreme Court reversed a lower court order made against Suntel, a fixed wireless firm that Dialog acquired in the past.

Dialog said the group paid 8.5 billion rupees in direct taxes and levies and 25.6 billion rupees in turnover taxes to the state in 2018 on total revenues of 109 billion rupees.

Sri Lanka's ceramic firms snarled in regulations; calls for more protection

ECONOMYNEXT - Sri Lanka's ceramic tile makers are snarled in a plethora mining and transport regulations blocking access to raw materials and increasing costs, officials said amid a call for greater protection.

Sri Lanka's ceramic firms are struggling to get raw materials, with a plethora of mining and transport regulations making it difficult to access raw materials.

Regulatory Muddle

A company trying to mine clay has to go through 16 different agencies, making it extremely difficult for ceramic firms even to mine their own land, industry officials said.

Owners of clay deposits were also barred in practice from digging deeper by authorities, though there appeared to be no regulations against it.

Aravinda Perera, a board member of the Sri Lanka Ceramic and Glass Council, an industry body, said companies have resorted to buying raw materials from third parties due the regulatory burden.

For sanitary ware, clay is imported. There are no import taxes on the material, at the moment, he said.

There were also long processes to get permission to transport, for both clay and silica, which is adding more regulatory burdens, ceramic and glass manufacturers told reporters.

Again, firms were relying on third parties, which were adding to costs and making Sri Lankan products less competitive in world markets.

Observers say it is better to develop a simplified system of clear regulation so that the companies themselves can mine their own land since it will be easier to monitor and enforce the rules when fewer players are involved.

Protectionist Taxes

Meanwhile, the industry called for a hike in protectionist Hamilton-List tariffs to give them more profits and get market share from importers.

Higher import duties to give bigger profits to local firms were started in the US by Alexander Hamilton.

It was taken to Europe by Friedrich List, a German, who was part of a school of thought called the German Historical Economics, which paved the way for more state interventions and nationalism. Germany eventually ended up in National socialism (Nazism).

Philosophers had pointed out that a process which started as discrimination against foreigners naturally ended with discrimination against minorities within a country.

Sri Lanka already has an import duty of 30 percent or a cess 100 rupees per square metre, whichever is higher. The cess had been reduced from 200 rupees. Imports are also charged port and airport levy on top of freight.

Reporters pointed out that high costs of toilet fittings and tiles was making it difficult for low income earners to build houses, with the bathroom now becoming the costliest room of a house.

Import taxes force a homeless person to borrow more than otherwise, and pay more interest reducing his disposal income for decades.

Industry officials said they realized that people wanted to move away from squatting pans to proper toilets. However, squatting pans are also taxed.

Competitiveness of the entire export industry in the country and services ranging from hotels to information technology was also undermined by high building costs, reporters pointed out.

Protection given to steel markers in Sri Lanka was pushing up construction costs across the board, making Sri Lanka uncompetitive.

Backfired Initiative

The Ceramics and Glass Council was set up with support from the US Agency for International Development's 'The Competitiveness Initiative', to carry out a 'Unified Strategy for Industry-wide competitiveness'.

However, the body had now become one of Sri Lanka's strongest protectionist lobbies, undermining the competiveness of an entire nation by pushing up building costs.

Sunil Wijesinha, a former head of Dankotuwa Porcelain and an expert in Japanese management techniques, helped bring the industry together in a bid to boost collaboration and lower cost through initiatives like joint procurement.

Even Board of Investment-approved export firms, which were allowed to import construction material duty free for factories and hotels, were forced to buy ceramic items at artificially high prices through a so-called 'negative list'.

The Ceramics Council called for a renewal of the negative list.

Sanjeewa Narangoda, from Fernwood Porcelain claimed that some imported tableware had poisonous substances like cadmium. Badly fired products could also leech lead from the glaze, analysts say. He called for more stringent regulations and quality controls at the import.

Spot checks carried out by Sri Lanka Standards, was not enough, he said.

Reporters pointed that the import of lower quality tiles or other products was encouraged by high import duties. Sri Lankan firms also sell 'factory rejects' though making public calls for quality.

Economic analysts, however, say selling factory rejects at a lower price is a completely capitalist and free market idea, unless they are incorrectly fired and leeching led.

They say 70 years after independence from British rule, a buyer who has earned their salary through hard work should have the freedom to decide how to spend their money and whether they want to buy a higher or lower quality product or a factory reject as long as they knows what they are buying.

Sri Lanka's Sampath Bank profits down amid loan losses

ECONOMYNEXT - Sri Lanka's Sampath Bank said its net profits for the December 2018 quarter fell 31.8 percent to 2.7 billion rupees from a year earlier amid a steep write-down of bad loans.

The firm's earnings per share for the quarter were 9.88 rupees, interim financials released at the Colombo Stock Exchange said. Net profits for the 2018 year fell 0.6 percent to 12.6 billion rupees with earnings per share of 46.85 rupees.

Sampath Bank's share was trading at 238 rupees, Friday.

Interest income for the December 2018 quarter grew 20.7 percent to 28 billion rupees from 2017, while interest expenses grew 11.9 percent to 16.4 billion rupees and gross interest income grew 35.5 percent to 11.6 billion rupees.

Other operating income was up 306.2 percent to 2.8 billion rupees.

The firm's loan book grew 15.3 percent from a year earlier to 675.9 billion rupees at end-December.

A change in accounting standards saw provisions for bad loans in the quarter grow to 4.2 billion rupees from 370.5 million rupees a year earlier.

"The bank’s loan growth slowed down during the year predominantly due to low credit demand," a statement said.

Over the year to December, group gross loans grew from 595 billion rupees to 697 billion rupees and non-performing loans grew from 9.3 billion rupees to 21 billion rupees.

Bad loans as a portion of total loans grew to 3.69 percent from 1.64 percent a year earlier.

The bank said weak economic conditions resulted in falling credit quality.

The Central Bank printed money in April to cut rates, just as the credit system recovered from a 2015/2016 balance of payments crisis, triggering another run on the rupee.

The Central Bank is targeting inflation (cutting rates saying inflation was low) despite having mutliple convertibility undertakings (a peg), with predictable results.

Deposits grew 10.2 percent from a year earlier to 699.7 billion rupees.

Sampath Bank's core capital adequacy ratio grew to 12.08 percent from 10.26 percent a year earlier, against a regulatory minimum of 8.875 percent with new funds being raised.

Total capital adequacy ratio grew to 15.73 percent from 14.41 percent against a regulatory minimum of 12.875 percent.

Sampath's asset base grew 15 percent to 947.8 billion rupees, while net assets per share were up 1.1 percent to 320.58 rupees.

Sri Lanka's Melstacorp net profits flat in December 2018

ECONOMYNEXT - Net profits at Sri Lanka's Melstacorp for the December quarter was flat at 1.5 billion rupees from a year earlier, with non-controlling interests cashing in on business growth.

Earnings per share for the quarter was 1.25 rupees. Melstacorp's share price gained 50 cents Thursday morning, trading at 46.50 rupees at the Colombo Stock Exchange.

Net revenue for the quarter grew 123.1 percent to 24.8 billion rupees from December 2017, while cost of sales grew 110.4 percent to 15.3 billion rupees and gross profits grew 147.3 percent to 9.5 billion rupees.

Administrative expenses grew 230.7 percent to 5 billion rupees from a year earlier.

Net finance income was 95.5 million rupees, compared to a net cost of 252.5 million rupees a year earlier.

The firm's long-term borrowings grew 38.2 percent to 32.3 billion rupees in December, compared to the start of the financial year nine months earlier.

Short-term borrowings fell 39 percent to 4.8 billion rupees.

For the nine months up to end-December, the firm's net profits fell 12.4 percent to 3.8 billion rupees from a year earlier, while earnings per share was 3.30 rupees.

Operating profits of the beverages segment in the nine months grew 32.4 percent to 6.5 billion rupees.

Plantations made an operational loss of 292.9 million rupees from a 355.9 million rupee profit a year earlier.

Telecommunications operational losses widened 3.7 percent to 1.3 billion rupees while diversified interests made profits of 4.2 billion rupees, up 328 percent from 2017.

Norges Bank, which manages the world's largest sovereign fund, divested its 0.664 percent shareholding (14th largest) in Melstacorp during the quarter.

The Yaseen family, one of the top three shareholders, was seen consolidating its position.

The RWC Frontier Markets Equity Master Fund entered the top 20 shareholder list at the 15th position holding 0.626 percent of Melstacorp shares.

Sri Lanka's Lion Brewery December quarter net up 169-pct

ECONOMYNEXT- Sri Lanka's largest beer producer Lion Brewery (Ceylon) Plc said its net profits for the December 2018 quarter grew 169 percent to 1.1 billion rupees from a year earlier with higher sales from tourism and exports.

Earnings per share for the quarter were 13.87 rupees. The firm's share closed trading 10 rupees higher at 590 rupees at the Colombo Stock Exchange on Thursday.

Revenue for the quarter grew 41 percent to 11.3 billion rupees from a year earlier, while cost of sales grew 37 percent to 8.3 billion rupees and gross profit grew 55 percent to 3 billion rupees.

The firm said demand for its beer has grown in global markets and it now exports two containers daily.

Net finance costs for the quarter fell 41 percent to 202.5 million rupees.

Long-term borrowings of Lion fell 24.9 percent to 3.6 billion by end-December from the start of the financial year, while short-term borrowings fell 6.8 percent to 6.4 billion rupees.

For the first nine months of the 2019 financial year, the firm's net profits grew 192 percent to 2.4 billion rupees from a year earlier while earnings per share were 29.91 rupees.

Sri Lanka DSI Samson Group downgraded to BBB(lka)

ECONOMYNEXT - Sri Lanka's DSI Samson Group (Pvt) Ltd (DSG) has been downgraded by a notch to BBB(lka) due to its leverage, the rating agency said.

Fitch has re-calibrated the island's rating scale after a sovereign downgrade by notch to 'B'.

"The elevated leverage is due to the weakening domestic sales of pneumatic tyres to
original equipment manufacturers (OEMs) and significant competitive pressures in the footwear
retail segment," Fitch Ratings said.

"We expect operating cash flow from the company's solid tyre exports and value-added
footwear businesses to improve in the medium term, but this is unlikely to be sufficient
to reduce leverage below the level commensurate with a higher rating."

DSG's net leverage increased to 5.2x in the financial year ended March 2018 (FY18) from 4.4x a year earlier due to the weaker operating performance in several of its key domestic segments. Leverage has since fallen to 5.0x by 31 December 2018 due to an improvement in exports and domestic sales of value-added footwear.

"We expect net leverage to drop to 4.9x in FY19 and 4.6x through FY21, buoyed by the company's efforts to further improve cash flow contributions from exports and domestic sales of value-added footwear."

The full statement is reproduced below:

DSI SAMSON GROUP (PRIVATE) LIMITED

The rating downgrade reflects Fitch's expectations that DSG's net leverage - defined as lease adjusted
debt net of cash/operating EBITDAR - is likely to remain above 4.5x over the medium
term.

The elevated leverage is due to the weakening domestic sales of pneumatic tyres to
original equipment manufacturers (OEMs) and significant competitive pressures in the footwear
retail segment. We expect operating cash flow from the company's solid tyre exports and value-added
footwear businesses to improve in the medium term, but this is unlikely to be sufficient
to reduce leverage below the level commensurate with a higher rating.

DSG's rating continues to reflect its leading positions in domestically sold pneumatic tyres to the
replacement market and footwear, which are supported by its well-known brand and
widespread distribution network.

Higher Financial Risk: DSG's net leverage increased to 5.2x in the financial year ended March
2018 (FY18) from 4.4x a year earlier due to the weaker operating performance in several of its
key domestic segments. Leverage has since fallen to 5.0x by 31 December 2018 due to an
improvement in exports and domestic sales of value-added footwear.

We expect net leverage to drop to 4.9x in FY19 and 4.6x through FY21, buoyed by the company's efforts to further improve cash flow contributions from exports and domestic sales of value-added footwear.

Fitch believes the pressure on free cash flow from high interest costs and notable working capital
outflows as well as growth capex will keep net leverage above 4.5x in the medium term.

We expect DSG's FFO fixed-charge coverage to improve to 1.5x in the medium term, compared
with an estimated 1.4x at end-December 2018 and a low of 1.1x at FYE18, supported by a
recovery in profitability. However, coverage will likely remain below the three-year historical
average of 2.2x due to weaker domestic demand and continued pressure from high interest
costs.

Lower EBITDA Margins: Fitch expects DSG's EBITDA margins to recover to 8.5% in FY19, from
7.7% in FY18, after they were diluted by lower domestic footwear and tyre sales volumes,
higher crude oil and rubber prices as well as the company's efforts to liquidate some of its
footwear inventory at discounted prices. The recovery in margins will be supported by greater
contribution from high-margin solid tyre exports and higher-value-added footwear. However,
we expect rising cost pressures due to the depreciating Sri Lankan rupee and intense price
competition in the domestic market to keep EBITDA margins below the three-year historical
average of 9.0%.

Falling Domestic Sales: We expect domestic sales of tyres to remain under pressure due to the
weakening demand for bicycle tyres in Sri Lanka and the tightening of three-wheeler financing
regulations in 2017. The regulator lowered the upper band of loan-to-value ratios associated
with three-wheeler leases to 25% from 70% to curb vehicle imports, which continues to impede
volume growth mainly from the OEM market. However, DSG's significant exposure to the
replacement market mitigates this risk to some extent.

Domestic footwear volumes declined by around 4% in FY18 on rising competition from smallscale
producers in the lower-end of the market. DSG counterbalances this risk by selling valueadded
footwear as the competition is less intense. DSG also compensates for the lost sales to
some extent by supplying raw materials such as rubber sheets and soles to its competitors in the
footwear market.

Leading Market Position: DSG has leading market positions in the domestic footwear market and
the bicycle, motorcycle and three-wheeler tyre industries, supported by its established brand,
and a widespread distribution network.

Nevertheless, we expect the intensifying competition in the footwear industry from small-scale domestic producers and importers that are circumventing the current tariff structure on imports to be a key long-term risk. Domestic sales of motorcycle and three-wheeler tyres also face rising competition from other well-known brands and imported products.

Limited Structural Subordination Risk: DSG is a holding company that depends on dividends paid
by its subsidiaries to service its own obligations. However, the structural subordination of
holding-company creditors is mitigated by DSG's strong control over its operating subsidiaries
that accounted for over 80% of consolidated EBITDA in FY18. This supports a high degree of cash
fungibility within the group and enables the holding company to service its own obligations.

Sri Lanka’s January tea export shipments up 13-pct

ECONOMYNEXT – Sri Lanka’s tea exports in January 2019 rose almost 13 percent or by 2.7 million kilos to 23.6 million kilos from a year ago, brokers said.

Tea bags and packeted tea have shown a growth during the period under review, while bulk tea exports decreased, Forbes & Walker Tea Brokers said.

Total tea export revenue rose 17.5 percent or by three billion rupees to 20.1 billion rupees during the period.

The broker said the FOB or free on board value of exports were up four per cent or 33.41 rupees to 852.14 rupees a kilo in January 2019 from the year before.

Among the major importers of Sri Lankan tea in January 2019, Iraq emerged as the largest importer followed by Russia and Turkey.

Iran, Libya and Syria are some of the other noteworthy importers.

Sri Lanka's The Finance trading suspended over accounting issues

ECONOMYNEXT - Sri Lanka's The Finance Company Plc, a troubled non-bank lender which was slapped with a cease-and-desist order by the regulator last week, said it planned to resolve accounting problems highlighted by auditors by March 2019.

The Finance Company has made losses and is facing a 17 billion-rupee gap in the balance sheet.

Last week, the Central Bank ordered it not to take any new deposits or give loans.

Existing depositors will be paid interest at Treasury bill rates.

The firm said in a stock exchange filing that the Securities and Exchange Commission (SEC) had informed it on February 01 that it could not honour the firm's request in November for an extra nine months to resolve accounting issues highlighted by auditors.

Trading in The Finance shares had been suspended on February 17.

Sri Lanka's Seylan Bank December quarter profits slashed on write-downs

ECONOMYNEXT - Profits at Sri Lanka's Seylan Bank Plc in the December 2018 quarter was wiped out by a one-off provision for retirement benefits and loans loss provisions under tighter accounting rules, and economic conditions, interim accounts showed.

The firm said profits fell 96 percent to 50.3 million rupees in the quarter from 1.45 billion rupees a year earlier.
The group reported earnings of 13 cents per share for the quarter. For the year to December, the firm reported earnings of 8.57 rupees per share.

Seylan provided 1.134 billion rupees of additional gratuity during the quarter.

Loan loss provisions rose steeply to 1.5 billion rupees from 64 million rupees a year earlier amid weak economic conditions and tighter accounting rules.

"Construction, tourism, and manufacturing sectors were the major contributors to this deterioration and the bank has implemented a rigorous program of restructuring, rehabilitation, and recovery to address this issue," the firm told shareholders in a review.

In the quarter, group interest income grew 18.1 percent to 13.6 billion rupees and interest expenses grew at a faster 20.2 percent to 8.86 billion rupees and net interest income grew 14.3 percent to 4.47 billion rupees.

Fee income grew 6.8 percent to 1.1 billion rupees.

During the year the bank said loans grew by 46 billion rupees to 327 billion rupees.

Deposits grew 50 billion rupees to 307 billion rupees, with 71.2 percent coming from fixed deposits, which pay higher interest up from 68.8 percent from a year earlier.

The bank's Tier capital was at 10.20 percent and with Tier II, 13.3 percent which was above minimum regulatory requirements, though gross non-performing loan ratio climbed to 5.98 percent from 4.42 percent.

Group net assets grew 1.1 percent to 36.2 billion rupees and gross assets grew 15 percent to 432 billion rupees during the year.

Sri Lanka rupee ends higher as banks sell dollar; stocks at near 4-mth low

Reuters: ** The Sri Lankan rupee closed higher on Thursday, a day ahead of the central bank’s policy rates review, boosted by dollar sales by banks in lacklustre trade, market sources said. 

** The stock market fell for the fourth straight session to a near four-month low as foreign investors exited from the island nation’s risky assets. 

** The rupee ended at 179.45/65, compared with Wednesday’s close of 179.50/70. 

** Sri Lanka’s central bank is expected to leave its key interest rates steady on Friday, a Reuters poll showed, as the island’s economy slowly recovers from a political crisis that sparked credit downgrades by all three major global rating agencies. 

** The local currency had posted a weekly loss of 0.42 percent in the last week due to high dollar demand from importers and outflows from the stock market. 

** It has risen 1.8 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence in Sri Lanka after the country repaid a $1 billion sovereign bond in mid-January. 

** The bond market saw inflows of 3.3 billion rupees in the week ended Feb. 13, recording its fourth straight weekly inflow, the latest central bank data showed. 

** Worries over heavy debt repayment after a 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country is struggling to repay its foreign loans. 

** Sri Lanka has raised its borrowing limit for dollar-denominated bonds to $3 billion and chosen seven lead managers to tap the international market as soon as possible, three government sources said on Tuesday. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

** The Colombo Stock Exchange index fell 0.7 percent to 5,839.04 on Thursday falling for the fourth straight session, its lowest close since Oct. 26. 

** The benchmark index had fallen 0.92 percent last week, after losing 0.3 percent in the previous week. It declined about 1 percent in January. 

** The turnover was 1 billion rupees, more than last year’s daily average of 834 million rupees. 

** Foreign investors were net sellers of 43.1 million rupees worth of shares on Thursday, extending the year to date net foreign outflow to 5.2 billion rupees worth of stocks, and 18.5 billion rupees since the political crisis began on Oct. 26, 2018. 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Rashmi Aich)

Shareholders nod Sri Lanka's NDB to sell Rs6.5bn bail-in bonds

ECONONOMYNEXT - Shareholders of Sri Lanka's National Development Bank has give the go-ahead of the lender to raise up to 6.5 billion rupees of bail-in bonds.

The firm will sell 5-year listed, rated, unsecured, subordinated redeemable debentures, which may be converted to equity if needed (Basel III-compliant).

The lender will sell 5 billion rupees of bonds with an option to increase by another 1.5 billion rupees.

Sri Lanka's Lee Hedges to build Rs1.1bn car park

ECONOMYNEXT - Sri Lanka's Lee Hedges Plc said its board has decided to build a 1.1 billion rupee car park in a property on a Colombo 03, Galle Road property.

The car park is the first phase of a larger commercial development.

It will take 12 months to complete and will have 186 parking slots in 6 floors, the firm said in a stock exchange filing.

Sri Lanka approves 13 new hotel investments in Dec quarter

ECONOMYNEXT - Sri Lanka has approved for 54.7 million US dollars in hotel investments during the fourth quarter ending in December 2018, the state tourism office said.

Sri Lanka Tourism Development Authority (SLTDA) data showed the investments were across 13 new hotel projects, of which 12 were small, with less than 49 rooms each.

One project in Trincomalee will have 50 rooms.

In total, 264 rooms will be added to the national supply once the newly approved hotels finish construction, for an average of 20 rooms per hotel.

Four of the approvals granted are for hotels in the Galle district, and two are in the Gampaha district.

Another nine new hotels, worth investments of 14.8 million US dollars started their commercial operations during the quarter.

These hotels added 247 rooms to the national supply.

The SLTDA said the total registered room supply in Sri Lanka is now 38,214, up from 36,693 in the September quarter. These include hotels, guest houses, bungalows, homestays, and rentals.

Sri Lanka's Softlogic makes loss in Dec quarter, expands supermarkets chain

ECONOMYNEXT - Sri Lanka’s diversified Softlogic Holdings group made a big loss in the December 2018 quarter but reported plans to continue expanding its new chain of supermarkets as it was optimistic about future consumer demand.

The group made a loss of 347 million rupees in the December 2018 quarter compared with net profits of 77 million rupees the previous year, interim results filed with the stock exchange showed.

The quarterly loss per share was 29 cents. The share last traded at 18.80 rupees.

December 2018 quarter sales rose seven percent to 19.7 billion rupees.

In the nine months to December 2018, group EPS was 50 cents with net profits down slightly to 75 million rupees.

Softlogic group chairman Ashok Pathirage told shareholders their new ‘Softlogic Glomark’ supermarket outlet in the suburb of Delkanda attracted positive customer response with the outlet performance exceeding expectations.

“We will be opening in Kottawa, Mount Lavinia, Colombo 7, Negombo, and Malabe,” he said. “An essential outlet concept of around 2,000-3,000 square feet is being developed to be set up at Asiri Central, Asiri Kandy, Orion City and in Kurunegala.”

Sri Lanka’s 01-year Treasury yield edges up to 10.73-pct

ECONOMYNEXT – Sri Lanka’s 01-year Treasury Bill yield edged up one basis point to 10.73 percent at Wednesday’s auction, with the public debt department of the Central Bank selling double what was offered.

Bids for six billion rupees of 03-month bills offered were rejected while the yield on the 06-month bill remained at 9.87 percent, the same as two weeks ago, data from the Public Debt Department showed.

It accepted 20.4 billion rupees of 01-year bills, having offered 10.5 billion rupees worth of bills and getting offers of 44.5 billion rupees.

Sri Lanka's Piramal Glass sees strong export growth if fuel is formula-priced

ECONOMYNEXT - Sri Lanka's Piramal Glass Ceylon Plc says it can compete better with foreign producers and boost exports if furnace oil is priced on a formula linked to crude oil.

Furnace oil now costs 92 Sri Lanka rupees a litre, and it is not linked to crude oil prices.

Chief Executive Sanjay Tiwari says the comparable cost in India is 72 rupees.

"Furnace oil prices linked to crude oil will make exports more competitive," Tiwari said.

"We are not asking for subsidies."

Piramal Glass now exported about 150 containers a month with about 45 containers going to India. It also exports to the USA, Canada, Australia, New Zealand and Myanmar.

"We are working on to increase our exports percentage to total capacity up to 40 percent," he said. "This may take two years."

The company is now building a fifth production line with an investment of 1.3 billion rupees.

The new line will increase capacity to 300 tonnes per day from the current 260 tonnes.

In the nine months to December, Piramal increased exports revenues 31 percent to 2.123 million rupees amid as domestic sales fell 3 percent to 3,362 million rupees.

Sri Lanka rupee ends higher as banks sell dollar; stocks at near 4-mth low

Reuters: ** The Sri Lankan rupee rose 0.2 percent on Wednesday in a lacklustre trade on dollar sales by banks, market sources said. 

** The stock market fell for the third straight session to a near four-month low as foreign investors exited from the island nation’s risky assets. 

** The rupee ended at 179.50/70, compared with Monday’s close of 179.80/180.00, market sources said. Markets were closed on Tuesday for a public holiday. 

** The local currency had posted a weekly loss of 0.42 percent in the last week due to high dollar demand from importers and outflows from the stock market. 

** It has risen 1.7 percent so far this year as exporters converted dollars and foreign investors purchased government securities amid stabilising investor confidence in Sri Lanka after the country repaid a $1 billion sovereign bond in mid-January. 

** Sri Lanka’s central bank is expected to leave its key interest rates steady on Friday, a Reuters poll showed, as the island’s economy slowly recovers from a political crisis that sparked credit downgrades by all three major global rating agencies. 

** The bond market saw inflows of 3.3 billion rupees in the week ended Feb. 13, recording its fourth straight weekly inflow, the latest central bank data showed. 

** Worries over heavy debt repayment after a 51-day political crisis that resulted in a series of credit rating downgrades dented investor sentiment as the country is struggling to repay its foreign loans. 

** Sri Lanka has raised its borrowing limit for dollar-denominated bonds to $3 billion and chosen seven lead managers to tap the international market as soon as possible, three government sources said on Tuesday. 

** The rupee dropped 16 percent in 2018, and was one of the worst-performing currencies in Asia due to heavy foreign outflows. 

** The Colombo Stock Exchange index fell 0.29 percent to 5,880.17 on Wednesday falling for the third straight session, its lowest close since Oct. 26. 

** The benchmark index had fallen 0.92 percent last week, after losing 0.3 percent in the previous week. It declined about 1 percent in January. 

** The turnover was 172.8 million rupees, well below last year’s daily average of 834 million rupees. 

** Foreign investors were net sellers of 35 million rupees worth of shares on Wednesday, extending the year to date net foreign outflow to 5.1 billion rupees worth of stocks, and 18.5 billion rupees since the political crisis began on Oct. 26, 2018. 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Rashmi Aich)