Sri Lanka IOC unit hit by ad hoc price cuts; formula not cost reflective

ECONOMYNEXT - Lanka IOC, a publicly traded unit of Indian Oil Corporation, is expecting better results in the March 2019 quarter after being hit by multiple price cuts during a political crisis, but an existing pricing formula itself is not cost reflective, a top official said.

In the December quarter, Lanka IOC lost 986 million rupees, with gross profits falling to 67 million rupees from 277 million rupees a year earlier.

In addition to petrol and diesel, the firm also sells lubricants, which have positive margins and bunkers tare subject to competition.

Sri Lanka re-started a pricing formula in March 2018, under which the Finance Ministry announces a retail price for fuel every 10th of the month.

But the price formula itself is also not truly cost reflective, Lanka IOC Managing Director Shyam Bohra said.

"The components considered in the pricing formula are required to be suitably updated in line with actual cost," he said.

"The matter is being taken up by the company with the Government."

These include the cost of a terminal and dealer margins. The firm pays a 3 percent margin to dealers.

In addition to a common user terminal managed by Ceylon Petroleum Corporation used by both firms, Lanka IOC has a terminal in a tank farm in Trincomalee.

The government also changes taxes on fuel frequently, which makes it more difficult to manage costs.

During a so-called 'coup' on October 26 where ex-President Mahinda Rajapaksa was unexpectedly appointed Prime Minister, prices were cut several times outside the formula, re-politicising fuel prices.

A steep fall in the rupee against the US dollar also pushed up costs in the last quarter.

In the March quarter, the rupee has stabilised and there is no loss on inventory expected, which will help bring better results, Bohra said.

"We expect better performance in the March quarter," he said. "Positive margins from other product lines will contribute."

The firm now sells petrol at a higher price than state-run Ceylon Petroleum Corporation's 124 rupees under the formula.

Dealers have protested the loss of business, but Bohra says they have been compensated with an extra margin. The stock closed at 20.50 rupees Thursday.

Sri Lanka's Alumex makes Rs 63mn loss in December quarter

ECONOMYNEXT – Alumex, the aluminium extrusions subsidiary of Sri Lanka's Hayleys group, said it lost 63.4 million rupees in the December 2018 quarter compared with a net profit of 102 million rupees the year before.

Sales of the firm, which commissioned Sri Lanka's largest aluminium extrusion plant in 2018, rose 17 percent to 1.3 billion rupees in the period, according to interim accounts filed with the stock exchange.

Costs rose faster than net revenue during the period, the accounts showed, with net finance costs soaring to 147 million rupees from 29 million rupees the previous year.

December quarter’s loss per share was 21 cents. Alumex shares were trading at 13.10 rupees in early trade Tuesday, down 30 cents or two percent.

In the nine months to December 2018, the firm, which has a dominant market share, reported earnings per share of 10 cents with net profit down 87 percent to 29.3 million rupees.

Sri Lanka’s LVL Energy December quarter net profit down 40-pct

ECONOMYNEXT - Sri Lanka’s LVL Energy Fund, which operates hydro, wind, and thermal power plants, said net profit fell 40 percent to 48 million rupees in the December 2018 quarter from a year ago.

Sales of the group, which has diversified into solar power, fell 9.5 percent to 114 million rupees over the same period, according to interim accounts filed with the stock exchange.

Earnings per share for the quarter were eight cents. LVL Energy Fund’s share last traded unchanged Tuesday at 8.00 rupees.

EPS for the nine months to December 2018 was 83 cents with net profit up 21 percent to 483 million rupees from the previous year.

A note to the accounts said LVL Energy Fund, a subsidiary of Lanka Ventures, had invested 117 million rupees on 17 January 2019 in the Makari Gad Hydro Power project in Nepal.

Tax costs shot up to 85 million rupees in the nine-month period from 26 million rupees last year.

LVL Energy Fund has power plants in Sri Lanka, Bangladesh and Nepal.

Its hydro power plants performed the same as the previous year, while its thermal power plants in Bangladesh showed a stronger performance during the period compared to last year.

“The share of profit from the Bambabarapana hydro power plant that commenced commercial operation in the last quarter of the previous financial year also contributed towards a higher group profit for the period,” the statement said.

Power generation of wind power plants during the period was less than in the previous year, mainly due to less favourable weather conditions.

LVL Energy Fund operates seven hydro power projects in Sri Lanka with a total capacity of 19.4 MW and two wind power projects with an installed capacity of 15.3 MW in Kalpitiya.

Sri Lanka's United Motors December net profit down 44-pct

ECONOMYNEXT - Profits at United Motors Plc, agents for Mitsubishi automobiles in Sri Lanka, fell 44 percent to 60 million rupees in the December 2018 quarter as sales slowed after government import controls were implemented to defend the rupee.

Interim accounts filed with the stock exchange showed quarterly sales fell 7.2 percent to 3.2 billion rupees.

The firm reported earnings of 59 cents per share for the quarter.

In the nine months to December, United Motors reported earnings of 1.97 rupees per share on total profits of 198 million rupees, down 56 percent.

Nine month revenues fell 10.6 percent to 10 billion rupees.

The fall in sales and profits at United Motors came after credit restrictions and tax hikes that have slowed car imports.

Sri Lanka’s Haycarb December net profit up 30-pct

ECONOMYNEXT - Sri Lankan coconut shell-based, activated carbon-maker Haycarb said net profit rose 30 percent to 211 million rupees from a year ago.

Quarterly earnings per share were 7.12 rupees, according to interim accounts filed with the stock exchange.

The share was trading at 130 rupees Thursday morning, unchanged.

Quarterly sales rose 39 percent to 5.3 billion rupees.

EPS for the nine months to December 2018 were 17.36 rupees with net profit up 29 percent to 516 million rupees and sales up 31 percent to 14.3 billion rupees

Haycarb Managing Director Rajitha Kariyawasan said the growth in sales was owing to adjustment of activated carbon prices in the first half of the year to compensate for raw material price hikes and growth in sales of value-added products.

“With the availability of charcoal improving in Sri Lanka, Indonesia and India due to improved coconut crop, the company has gradually passed the benefit to its valued customers,” he said.

Haycarb continued to face stiff competition from India and Philippines, the largest coconut carbon-producing countries in the region.

“The company has made significant strides in acquiring and growing new strategic customer accounts and market segments, backed by robust product development initiatives, auguring well for the growth plans of the business,” Kariyawasan said.

Sri Lanka’s Teejay Lanka December quarter net profit up 12-pct

ECONOMYNEXT – Teejay Lanka’s net profit rose 12 percent to 551 million rupees in the December 2018 quarter from a year ago with higher sales, better capacity use especially in India and a weaker rupee, although in dollar terms earnings were flat.

The Sri Lankan fabric supplier’s sales in the third quarter of 2018-19 were up 28 percent to 8.48 billion rupees, interim accounts filed with the stock exchange showed.

Quarterly earnings per share were 78 cents. Teejay Lanka’s share closed at 34 rupees Thursday, down 40 cents or 1.16 percent.

In the nine months to December 2018, EPS was 1.79 rupees with sales up 26 percent to 23 billion rupees and net profit up 16 percent to 1.26 billion rupees.

Teejay Lanka Chairman Bill Lam said in a statement that this was the fifth consecutive quarter of sales and profit growth, “demonstrating its resilience during a period of higher raw material and utility costs.”

The growth was achieved by operating at optimal capacity with the margin for the quarter improving to 12.3 percent from 11.2 percent on a quarter-on-quarter basis “as a result of better loading and an improved mix via the group’s US and EU business units,” he said.

“Additionally, improved capacity utilisation across the group, mainly with Teejay India’s expanded capacity exceeding expectations with optimum production and capacity utilisation, had contributed to the performance,” he said.

“The depreciating rupee and cost reduction initiatives also helped to keep overhead cost increases below revenue growth, Lam explained.

Teejay Group had a strong order book for the final quarter of 2018-19, projecting strong numbers for the group, he said.

“While we continue to see growth opportunities for Teejay Group, we also see challenges, foremost among them sale mix and raw material price volatility and increases in utility costs,” Lam said.

“Despite the challenging market conditions, the group is optimistic that with a strong order book, capacity optimisation and the depreciation of the rupee, it will end the financial year on a strong footing.”

In dollar terms, December 2018 quarter profit growth was flat at 3.3 million.

A weft knit fabric specialist with manufacturing operations in Sri Lanka and India, Teejay is one of the region’s largest textile manufacturers, and supplies fabric to some of the top international brands, a statement said.

One of Sri Lanka’s largest apparel exporters, Brandix Lanka has a 33 percent stake in Teejay Lanka and Pacific Textiles of Hong Kong 28 percent.

Sri Lanka's Sampath Bank Basel III debentures get 'A(lka)' final rating

ECONOMYNEXT- Ratings agency Fitch awarded Sri Lanka's Sampath Bank Plc's seven billion rupee five year Basel III compliant debentures a national long-term rating of A (lka).

The final rating is the same as the expected rating assigned on 17 December 2018, and follows the receipt of documents reflecting information already received, Fitch said.

Sampath Bank, rated A+(lka)/Stable, will be issuing the debentures to raise capital to meet regulatory requirements and expand the loan book.

Fitch said the debentures are based on Sampath's long-term rating, which 'incorporates its evolving franchise, high-risk appetite and improving-but lower-than-peer capitalisation'.

The full Fitch Ratings statement follows:

Fitch Ratings-Colombo-07 February 2019: Fitch Ratings has assigned Sampath Bank PLC's (A+(lka)/Stable) proposed Basel III-compliant subordinated debentures a National Long-Term Rating of 'A(lka)'.

The notes, which will total LKR7 billion and mature in five years, include a non-viability clause and will qualify as regulatory Tier II capital for the bank. The bank plans to use the proceeds to strengthen its Tier II capital base and support its loan-book expansion. The debentures are to be listed on the Colombo Stock Exchange.

The final rating is the same as the expected rating assigned on 17 December 2018, and follows the receipt of documents conforming to information already received.

Key Rating Drivers

Fitch rates the proposed Tier II instrument one notch below the bank's National Long-Term Rating of 'A+(lka)' to reflect the notes' subordinated status and higher loss-severity risks relative to senior unsecured instruments. The notes would convert to equity upon the occurrence of a trigger event, as determined by the Monetary Board of Sri Lanka.

Sampath's National Long-Term Rating is used as the anchor rating because the rating reflects the bank's standalone financial strength. Fitch believes that the bank's standalone credit profile best indicates the risk of becoming non-viable.

Fitch has not applied additional notching to the notes for non-performance risk, as they have no going-concern loss-absorption features, in line with Fitch's criteria.

Sampath's National Long-Term Rating was affirmed on 28 September 2018, and incorporates its evolving franchise, high-risk appetite and improving-but lower-than-peer capitalisation.

Rating Sensitivities

The rating of the notes would move in tandem with Sampath's National Long-Term Rating.
Failure to maintain capital buffers commensurate with the bank's risk profile could pressure Sampath's rating. Conversely, Sampath's ratings could be upgraded if the bank strengthens its capitalisation significantly and restrains its growth trajectory at the same time.

Sri Lanka's Expolanka Freight net up 39-pct

ECONOMYNEXT - Profits at Sri Lanka's Expolanka Freight Holdings Plc grew 39 percent to 469 million rupees in the December 2018 quarter, helped by non-operating income and growth in core logistics business, interim results show.

The group reported earnings of 24 cents per share. In the nine months to December, Expolanka reported earnings of 54 cents per share on total profits of 1,065 million rupees.

In the December quarter revenues grew 31 percent to 27.7 billion rupees, cost of sales grew 30 percent to 22.6 billion rupees and gross profits grew at a fast 37 percent to 5.1 billion rupees.

Non-operating income grew six fold to 217 million rupees from 29 million rupees a year earlier.

"All core freight products remained robust, with Air Export continuing to be the largest contributor towards the overall business operations of the firm," Chief Executive Hanif Yusoof told shareholders.

"The sector continued to face challenges within the Ocean Freight product but managed to maintain stability in its global operations.

"The key origins for the group, South Asia & the Far East, continued to see growth & improvement in margins."

Contract logistic and operations were also stable, he said.

Sri Lanka's rupee has fallen from 153 to the US dollar to around 180 to the US dollar over 2018 as the Central Bank targeted the exchange rate, while printing money to target a policy rate.

Sri Lanka Access Engineering net up 116.5-pct in December

ECONOMYNEXT- Sri Lankan construction firm Access Engineering Plc's net profits for the December 2018 quarter grew 116.5 percent to 659.3 million rupees from a year earlier on construction and property sales, the company said.

Earnings per share for the quarter were 66 cents, the firm's quarterly financial statements said. The Access Engineering share was trading 20 cents higher at 14 rupees on Friday.

Revenue for the quarter was up 15 percent to 7.9 billion rupees from a year earlier, while cost of sales grew 11.3 percent to 6.6 billion rupees, and gross profits were up 37.9 percent to 1.3 billion rupees.

Other income was up 636 percent to 194.2 million rupees.

Net finance costs grew 56.8 percent to 186.4 million rupees from a year earlier.

Long-term borrowings of the firm fell to 5 billion rupees in December 2018 from 5.1 billion rupees at the start of the financial year in April, while short-term debt grew to 4.5 billion rupees from 3.9 billion rupees.

For the nine months of the 2019 financial year, Access Engineering's net profits grew 37.5 percent to 1.7 billion rupees from a year earlier, while earnings per share was 1.65 rupees.

Revenue was up 13.3 percent to 21.6 billion rupees while cost of sales were up 11.9 percent to 17.9 billion rupees and gross profits grew 20.6 percent to 3.7 billion rupees.

After tax profits for the construction segment for the nine months were up 83.2 percent to 1.3 billion rupees while revenue was up 17.5 percent to 12.5 billion rupees.

Property segment after tax profits grew 90.8 percent from a year earlier to 537.3 million rupees, while revenue was up 61.7 percent to 543.1 million rupees.

The automobile segment, hit by state import taxes and credit limits, saw profits fall 94.2 percent to 20.8 million rupees, while revenue grew 2.2 percent to 6.3 billion 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 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 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. a

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 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 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.

Tourist arrivals to Sri Lanka up 2.2-pct in Jan 2019

ECONOMYNEXT - Tourist arrivals to Sri Lanka in January 2019 rose 2.2 percent from a year earlier to 238,924, the tourism development authority said.

Arrivals grew 3.5 percent in November and 10.3 percent in December with officials saying a constitutional crisis dampened bookings.

In 2018, Sri Lanka welcomed 2,333,796 visitors, up 10.3 percent from a year earlier.

Sri Lanka rupee ends weaker on stock-related outflows

Reuters: ** Sri Lanka's rupee ended weaker on Tuesday, as banks bought dollars to facilitate stock-related outflows and importer greenback demand, market sources said. 

** The stock market closed down as foreign investors continued selling for the second straight session on Tuesday. 

** The rupee closed at 178.30/40 per dollar, compared with Monday's close of 177.75/90, market sources said. 

** The local currency posted a weekly loss of 0.7 percent last week due to importers' demand in the latter part of the week. 

** It has risen 2.5 percent so far this year as exporters converted dollars and foreign investors purchased government securities after a statement from the International Monetary Fund (IMF) and government's $1 billion debt repayment boosted confidence. 

** Investor confidence in Sri Lanka is stabilizing after the country repaid a $1 billion sovereign bond in mid-January, the central bank chief said last month. 

 ** The bond market saw inflows of 11.4 billion rupees in the week ended Feb. 6, recording its third 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. 

** 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 Index ended 0.51 percent weaker at 5,930.21 on Tuesday, its lowest close since Nov 23. 

** Bourse fell 0.3 percent last week, and declined about 1 percent in January. 

** The turnover was 1.1 billion Sri Lankan rupees ($6.18 million), well above last year's daily average of 834 million rupees. 

** Foreign investors were net sellers of 261.4 million rupees worth shares on Tuesday. They have been net sellers of 4.8 billion rupees worth of stocks so far this year, and 18.2 billion rupees since the political crisis began on Oct. 26, 2018. 

($1 = 178.1000 Sri Lankan rupees) 

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