Sri Lanka stocks inch higher in thin trade; rupee weaker

Reuters: ** Sri Lankan shares closed slightly higher on Wednesday, extending gains into a fourth session, but trading volume slumped to a near three-week low. 

** Traders said the Easter day bombings and aftermath violence weighed on investor sentiment. Most investors have shied away from the market since the April 21 bombings that killed more than 250 people. 

** Sri Lanka is unlikely to hit its full-year economic growth target of 3-4% following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters on Tuesday. A Reuters poll has predicted the growth to slump to its lowest in nearly two decades this year. 

** The International Monetary Fund (IMF) on May 14 approved the disbursal of a $164 million tranche of a loan programme, bringing the total disbursed to more than $1.16 billion. 

** Sri Lanka’s economy should still grow 3.5% this year and there has not been a revision yet, the IMF added on Thursday. 

** The benchmark stock index ended 0.08% firmer on Wednesday at 5,295.68. It fell 1.28% last week. 

** Turnover was 127.4 million rupees ($721,404), the lowest since May 3 and well below this year’s daily average of around 557.8 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors sold a net 30 million rupees worth of shares on Wednesday, extending the year-to-date net foreign outflow to 5.8 billion rupees worth of equities. 

** The rupee ended 0.23% weaker at 176.65/80 per dollar, compared with Tuesday’s close of 176.25/40, market sources said. 

** Analysts expect the currency to weaken as money flows out of stocks and government securities. 

** The rupee gained 0.1% last week and is up 3.4% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. 

** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. 

** Foreign investors sold a net 433.2 million rupees worth of government securities in the week ended May 15, extending net foreign outflow to 21.2 billion rupees so far this year, central bank data showed. 

** Investor sentiment was damaged at the end of last year when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds. 

($1 = 176.6000 Sri Lankan rupees) 

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

Sri Lanka Bank of Ceylon net down 12-pct in March; balance sheet shrinks

ECONOMYNEXT - Profits at Sri Lanka's state-run Bank of Ceylon, the country's largest commercial bank fell 12 percent in the March 2019 quarter to 4,179 million rupees as credit losses picked up and loans contracted, interim accounts showed.

Interest income grew 17 percent to 54.9 billion rupees and interest expenses grew at a slower 12.6 percent to 35.7 billion rupees, helping net interest income grow 26.3 percent to 19.1 billion rupees.

Loans contracted 2.1 percent to 1,429 billion rupees from December to March.

Credit losses grew 60 percent from a year earlier to 3,916 million rupees.

From December to March gross non-performing loans grew to 4.66 percent from 3.62 percent.

Fee income grew 24.6 percent to 2,249 million rupees.

Group gross assets fell 2.5 percent to 2,254 billion rupees. At bank level gross assets fell 2.7 percent to 2,207 billion rupees.

But net assets grew 3 percent to 125 billion rupees. Capital adequacy fell to 14.21 percent from 14.58 percent over the three months.

Sri Lanka’s Teejay Lanka March quarter profit up, cotton yarn prices stabilise

ECONOMYNEXT – Teejay Lanka’s net profit rose three percent to 3.4 million US dollars in the March 2019 quarter from a year ago as the cost of its main raw material, cotton yarn, stabilised and product prices were raised.

The Sri Lankan fabric supplier’s sales in the quarter were up 15 percent to 49 million dollars, interim accounts filed with the stock exchange showed.

Growth in profits and sales were higher in Sri Lankan rupee terms, owing to currency effects. The rupee fell sharply against the dollar in 2018 but recovered somewhat this year.

March quarterly earnings per share were 86 Sri Lankan cents. Teejay Lanka’s share closed at 29.90 rupees Thursday, down 20 cents or 0.7 percent.

In rupee terms, Teejay Lanka’s net profit rose 19 percent to 606 million rupees in the March 2019 quarter from a year ago with sales up 35 percent to 8.8 billion rupees.

Stock brokers Bartleet Religare Securities said strong performance in Teejay Lanka’s Indian unit aided the top line growth which is mainly owing to the expanded capacity resulting in volume growth and on improved utilization rates.

“USD top line too witnessed an increase of 15 percent year-on-year to USD 49 million, however a three percent appreciation in the Sri Lanka rupee would have limited further growth in the group’s top line, we believe.”

In the financial year to March 2019, Teejay Lanka said EPS was 2.65 rupees with sales up 29 percent to 31.8 billion rupees and net profit up 17 percent to 1.9 billion rupees.

Teejay Lanka Chairman Bill Lam said in a statement described the year as “a very successful” one for Teejay, in which the group overcame challenging global market conditions through capacity expansion and internal measures.

“Prices of our main raw material, cotton yarn, increased in the beginning of the year and stabilised during Q4. Dyes and chemical costs increased significantly due to the challenges faced by the suppliers,” he said.

“We also saw utility prices increase during the year which was directly attributable to the global movement of fuel prices. Through process improvements and price revisions on finished goods, we were able to mitigate part of the cost escalation.”

Sri Lanka and London Stock Exchange in MOU to promote bond trading

ECONOMYNEXT - London Stock Exchange Group and Colombo Stock Exchange has signed a memorandum of understanding to help develop an offshore market for rupee and dollar bonds.

LSEG said it will help CSE with developing a debt market and an offshore market in rupee bonds and FTSE Russell guidance in capital market classification and index inclusion.

Sri Lanka this year sold 2.4 billion US dollars of sovereign bond which are also traded in London.

Nikhil Rathi, CEO, London Stock Exchange Plc and Director of International Development, LSEG the memorandum of understanding will pave the way to work with the CSE and bring greater investments to the country.

Ray Abeywardena, the Chairman of CSE said: “Our two institutions share an excellent working relationship built on trust and mutual respect, which has paved the way for successful engagements in multiple initiatives over the years. The foray that we are jointly forging today is an extension of that relationship.

"The scope of the MoU paves the way for a number of new avenues of cooperation between the CSE and LSEG along with our respective depositories and will immensely advance CSE’s visibility and connectivity to international markets," CSE chairman Ray Abeywardena said.

Mark Field UK Minister of State for Asia and the Pacific, Sri Lanka's High Commissoner in London Manisha Gunasekara, Central Bank Governor Indrajit Coomaraswamy, Governor, Ranel T. Wijesinha, Chairman, Securities and Exchange Commission of Sri Lanka and Rajiva Rajeeva Bandaranaike, CEO, Colombo Stock Exchange were at the signing.

Sri Lanka's EPF enters stock market with blood in the streets

By Chandeepa Wettasinghe


ECONOMYNEXT - Sri Lanka's 2.3 trillion rupee state-managed Employees' Provident Fund, has returned to the Colombo Stock Exchange, Central Bank Governor Indrajit Coomaraswamy said with the benchmark index hitting seven year lows.

"The EPF has bought shares in one company last week," Governor Coomaraswamy told EconomyNext.

The governor said that EPF policy does not allow him to disclose the new investment.

Coomaraswamy said one of the main reasons for the EPF to enter the secondary stock market was due to the market currently being at a seven-year low, following a market crash after Easter Sunday bombings.

On May 16, Sri Lanka's stocks were valued at a price to earnings multiple of 8.3 times on historical earnings, though banks and some other firms are taking a beating, with forward multiples set to fall, though there are value stocks to pick, analysts say.

Stocks have been hit by political unrest, liquidity shortages and a slowing economy.

Coomaraswamy declined to name the stock EPF was buying, though there was speculation that Dialog Axiata, Piramal Glass or John Keells Holdings may have been the target.

"The Monetary Board has approved the EPF Investment Committee to purchase shares in a small list of companies, which will be added to as time goes on," Coomaraswamy said.

"The investments will be made cautiously. The Monetary Board has approved the Investment Committee to invest up to 6 percent of the portfolio in equity."

At the end of 2018, around 92 percent of the 2.3 trillion rupee fund was invested in government securities, 3.3 percent in equity, 1.9 percent in corporate bonds and 1.5 percent in fixed deposits.

The fund was growing by around 300 billion rupees a year, while government borrowing requirements are shrinking, Coomaraswamy said.

"The new investment policy framework is still being finalized, and we are adding new things to it from time to time," he said.

"We can't invest more in fixed deposits, because that may interfere with our monetary policy stance," he said.

"That narrows the options we have for investment."

Coomaraswamy had in the past months described the Sri Lankan stock market as going through a 'fire sale'.

The EPF largely stayed off the market, except for some sporadic sales, after coming under fire for being a 'buyer of last resort' around 2011 in particular at peak valuations amid charges of corruption by dealers.

Sri Lanka Singer group in the red in March quarter

ECONOMYNEXT - Singer (Sri Lanka) Plc, a consumer durables group which also has a financing arm made an eight million rupee loss in the March 2019 quarter, against a profit of 153 million rupees a year earlier, amid weak sales growth and higher financing costs.

The group, a unit of Hayleys Plc, reported a loss of 0.02 cents per share for the March quarter. In the 12 months to March the group reported earning 67 cents per share on total profits of 799 million rupees.

Gross revenues grew 2.9 percent to 14.0 billion rupees in the March quarter from a year earlier, and cost of sales rose 1.4 percent to 9.7 billion rupees.

Direct interest grew 25 percent to 349 million rupees.

Gross profits grew 5.2 percent to 3.9 billion rupees.

Selling and administration expenses grew 14.9 percent to 2.9 billion rupees.

"Additional adverse impacts such as rupee devaluation, increased borrowings due to import restrictions and imposition of 100 percent Letter of Credit margins, higher impairment costs arising from new accounting standards and new levies on financial sector hampered growth potential and profit earnings," Singer said in a statement.

Impairment losses on trade receivables grew to 340 million rupees from 199 million rupees.

The group interest costs, which include its finance company unit, rose to 804 million rupees from 554 million rupees a year earlier.

But there was an exchange gain of 169 million rupees, compared to a loss of 32 million rupees last year.

Sri Lanka's Lion Beer gives profit warning on blasts, taxes

ECONOMYNEXT - Sri Lanka's Lion Beer Plc said it expected a downturn in tourism after Easter Sunday blasts to hit revenues and also warned on a change to tax policy.

In the December 2019 quarter profits were down 28 percent from a year earlier to 854.5 million rupees, with last year's profits boosted by a 492 million rupees insurance receipt.

Revenues grew 18 percent to 11.9 billion rupees in the quarter, cost of sales grew 16 percent to 9.07 billion rupees and gross profits grew at a faster 26 percent to 2.89 billion rupees.

Full year revenues were up 44 percent to 42.8 billion rupees and gross profits were up 78 percent to 6.0 billion rupees.

Sri Lanka's beer sales picked up after taxes were reduced to be based on alcohol content. In 2015 taxes were raised to benefit a hard alcohol manufacturer, critics said.

In the most recent budget, beer taxes were raised but taxes on extra special arrack, the cheapest hard alcohol was not raised.

"Once again it seems that policy consistency is being compromised, an age‐old challenge for the private sector in Sri Lanka," the firm told shareholders.

The Easter Sunday blasts on hotels and churches had led to a sharp downturn in tourism.

"Unfortunately, the economy has taken a few steps back because of these events and we are likely to see a significant drop in tourism in the months ahead," the firm said.

"Whilst this has the potential to challenge our results in the immediate future, management is taking all possible steps to continue the positive momentum achieved in the year just concluded."

Lion Beer chief Suresh Shah told EconomyNext that the firm was looking to cut costs and look at export markets.

Sri Lanka PABC net down 13-pct in March; loans contract

ECONOMYNEXT - Profits at Sri Lanka's Pan Asia Bank fell 13 percent from a year earlier to 272 million rupees in the March 2019 quarter amid a higher tax bill and a pick-up in non-performing loans, interim accounts showed.

The bank reported earnings of 2.49 rupees per share for the quarter.

Interest income grew 12 percent to 4.8 billion rupees in the quarter from a year earlier, and interest expense grew at a slower 10 percent to 3.28 billion rupees and helping net interest income grow 16 percent to 1.55 billion rupees.

Loan losses grew to 376 million rupees in the quarter from 305 million rupees in the quarter from a year earlier.

Performing loans fell 4 percent to 104 billion rupees in the March quarter from December.

The gross non-performing loan ratio (net of interest in suspense) grew to 5.85 percent by the end of the March quarter from 5.44 percent in December.

Deposits fell 4 percent to 114 billion rupees.

Gross assets contracted 1 percent to 152 billion rupees. Net assets were flat at 3.61 billion rupees.

Total capital adequacy increased to 13.32 percent by end March from 13.32 percent amid weak loan growth.

Sri Lanka's Richard Pieris affirmed A(lka) by Fitch

ECONOMYNEXT- Ratings agency Fitch has affirmed Richard Pieris & Company (RICH) at A(lka) with a stable outlook over the firm's supermarket operations and diversified business.
"The affirmation of RICH's ratings reflect the group's substantial defensive cash flows stemming from its leading supermarket retail business, and diversification afforded by its export and plastics businesses," Fitch said.

"These strengths are counterbalanced by the challenges the company faces in the volatile plantation sector, as well as the structurally declining domestic tyre-retreading business."

Fitch said that it is expecting RICH's debt to increase over the next 18 months due to continuing challenges in the plantation, tyre and plastic sectors, as well as higher capital expenditure on increasing production capacity of its mattress business, which is seeing higher export demand from the US, Europe and China.

The ratings agency said that RICH's supermarkets are likely to expand at a slower pace compared to competitors due to short term weak domestic demand, although longer term market fundamentals are favourable.

The company's tea and rubber sectors will be hit by weaker global demand and oversupply, as well as higher wages, although the lower margins will be absorbed by the firm's profitable oil palm business, Fitch said.

The full Fitch Ratings statement follows:

Fitch Ratings has affirmed Sri Lanka-based conglomerate Richard Pieris & Company PLC's (RICH) National Long-Term Rating at 'A(lka)' with a Stable Outlook.

The affirmation of RICH's ratings reflect the group's substantial defensive cash flows stemming from its leading supermarket retail business, and diversification afforded by its export and plastics businesses.

These strengths are counterbalanced by the challenges the company faces in the volatile plantation sector, as well as the structurally declining domestic tyre-retreading business, which together account for around 20% of the group's EBITDA.

We expect RICH's leverage, defined as net adjusted debt/operating EBITDAR (excluding its finance company subsidiary, Richard Pieris Finance Limited (RPF)) to increase to around 2.6x in the next 12-18 months from 2.2x as at end-December 2018, as operating challenges are likely to continue in its plantation, tyre and plastics sectors, along with elevated capex and shareholder returns.

However, we expect RICH to maintain leverage below 3.0x, which is in line with its ratings.

KEY RATING DRIVERS

Exports to Drive Expansion: We regard RICH's export segment to be the main growth driver in the medium-term, helped by favourable demand dynamics.

RICH plans to substantially increase the capacity of its natural-foam mattress segment, which contributes around 65% of export segment revenue, by the year ending March 2020 (FY20), as the plant is currently running at significantly high capacity utilisation and there is strong customer demand from the US and Europe as well as new markets, such as China.

RICH says it will focus more on exporting high-margin value-added products to China, rather than the more commoditised products sent to other markets, and expects a multi-fold increase in export quantity in the next 12-18 months. This should bode well for the segment's top-line and margin.

Steady Retail Growth: We expect RICH to retain its conservative approach to expanding its retail segment over the next 12-18 months amid a slowdown in consumer-purchasing power.

We believe the pace of RICH's new-store openings to be moderate-in contrast to the aggressive growth plans of its two closest peers-to preserve margins under the weak demand conditions.

The company's approach saw it sustain its retail EBIT margin in the mid-single- digits in 9MFY19, while competitor margins fell to low-single-digits.

Over the medium-term, we expect RICH's retail sector to benefit from favourable demand, including higher per capita income, rising urbanisation and low supermarket penetration in the country.

Increased Pressure in Plantations: We expect volatile global tea and rubber prices in the next couple of years stemming from lower demand and oversupply to adversely impact RICH's plantation sector, which has significant exposure to these two crops at around 80% of sector revenue.

We also forecast cost pressure to mount in the short- to medium-term due to higher plantation-sector wages and rising input costs, such as pesticides and weedicides.

RICH's tea and rubber EBIT margin contracted to 1.5% in 9MFY19, from 8.9% in FY18, but we expect most of the margin pressure to be absorbed by the steady performance of RICH's palm-oil operations, which are benefitting from strong domestic demand and price protection.

The majority of the company's palm-oil crop is entering a high-yield phase, which should boost revenue and profit contribution to the group.

However, the sector's long-term growth has been curtailed with a government ban on new plantations due to environmental concerns, with no visibility as to when the ban will be lifted.

Slow Turnaround in Plastics and Tyres: We expect a turnaround in RICH's plastic segment, led by polyurethane mattresses, which contribute around 50% of segment revenue.

The plastic segment is seeing better margins after a significant supply shortage in a key raw material for almost 18 months.

However, domestic demand for mattresses as well as water tanks is likely to stay weak due to lower discretionary income and a slowdown in the construction industry.

RICH plans to expand into regional markets to offset the low domestic demand, but it may take time to generate meaningful returns.

We expect a turnaround in the tyre sector to be much slower than the plastic segment, as the revenue decline in the tyre retreading business may not be fully mitigated for a number of years with a shift to the trading business, which faces intense competition and low margins.

Flat Margins: We expect RICH's EBITDA margin to remain at around 10.5% to 11.0% (FY18: 10.9%) over the next two to three years, with higher export segment margins offset by pressure in the retail segment caused by rising wages and input costs in the plantation sector.

We do not foresee the group's EBITDAR margin returning to the historical highs of more than 12% owing to continuous margin pressure in the tyre-treading business and across most product categories in the plastic segment due to lower demand.

Weakening Leverage: We expect net leverage to increase to around 2.6x over the next 12-18 months due to the weak operating performance across most segments, capacity expansions in high-growth sectors and high shareholder returns.

We believe internally generated funds will be insufficient to meet its capex requirement of LKR5.6 billion over FY19 to FY20 and shareholder returns, which mean RICH will require external funding.

Net adjusted leverage should improve closer to 2.0x from FY21 if capex pressure eases and core operations turn around as we expect.

Criteria Variation: Fitch's Corporate Rating Criteria allows for the deconsolidation of subsidiaries that are regulated banks from the financials of an industrial parent company when assessing the parent's credit rating.

RPF, which is 100%-owned by RICH, is a regulated finance company and not a bank, but local regulations for finance companies are similar to those applicable to local banks.

Therefore, Fitch has removed RPF's borrowings, cash balance and EBITDA from RICH's consolidated financials.

We do not expect RICH to inject new capital into RPF in the next two years in light of the subsidiary's comfortable capital adequacy ratios vis-a-vis its growth plans.

DERIVATION SUMMARY

RICH is a diversified conglomerate with exposure to both defensive sectors and growth markets.

The company is rated two notches below Hemas Holdings PLC (AA-(lka)/Stable), another Sri Lanka-based conglomerate, and Lion Brewery (Ceylon) PLC (AA-(lka)/Stable), the country's leading brewer, to reflect RICH's higher exposure to the cyclical plantation sector and the structurally declining tyre sector, which increases its business risk.

Sunshine Holdings PLC (A-(lka)/Stable), another domestic conglomerate, is rated one notch below RICH to reflect its smaller operating scale, higher exposure to the cyclical plantation sector and regulatory risk in pharmaceuticals, which more than offset Sunshine's lower leverage.

RICH is rated one notch above the leading consumer durables retailer, Singer (Sri Lanka) PLC (A-(lka)/Stable), to reflect RICH's lower leverage.

KEY ASSUMPTIONS

Fitch's Key Assumptions Within Our Rating Case for the Issuer

- Revenue growth to average in the low-double-digits from FY20-FY22 owing to retail and export sector capacity expansion and a turnaround in the plastic segment, which will be somewhat offset by challenges in the plantation sector and the structural decline in the tyre business.

- EBITDAR margin to remain around 10.5%-11.0%, helped by a margin improvement in the export and plastic segments, which will mitigate cost escalation in the plantation and tyre segments and expansion-related expenses in the retail business.

- Capex to average LKR2.0 billion-2.5 billion a year from FY20-FY22 to fund the expansion of the retail and export segments.

- Dividend payout ratio of around 40% of net income to be maintained.

- No further equity infusions into RPF in the next two years

RATING SENSITIVITIES

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

- A sustained improvement in adjusted net debt/EBITDAR (adjusted for finance subsidiary) to below 2.0x (End-December 2018: 2.2x).

Developments That May, Individually or Collectively, Lead to Negative Rating Action

- An increase in adjusted net debt/EBITDAR (adjusted for finance subsidiary) to over 3.0x for a sustained period. This sensitivity has been tightened to reflect Fitch's revised approach of excluding RPF's debt, cash, and EBITDA.

- Adjusted EBITDAR coverage of gross interest and rent (adjusted for finance subsidiary) fallingbelow 2.5x for a sustained period (end-December 2018: 2.5x).
- Significant investments in non-core businesses that could hurt group profitability or cash flow generation.

LIQUIDITY

Manageable Liquidity: RICH had around LKR6.8 billion of unrestricted cash and LKR3.2 billion in unutilised credit facilities at end-2018 to meet LKR11.2 billion of debt (excluding RPF) maturing in the next 12 months.

However, around LKR9.0 billion of short-term debt consists of working-capital facilities, which we expect to be rolled over by lenders in the normal course of business, easing liquidity pressure.

RICH's free cash flows are likely to remain negative in the next 12 months owing to its weak operating performance, continuous capex and shareholder returns.

CRITERIA VARIATION

Fitch's Corporate Rating Criteria allows for the deconsolidation of subsidiaries that are regulated banks from the financials of an industrial parent company when assessing the parent's credit rating.

Fitch has applied this approach in assessing RICH's National Long-Term Rating, whereby we have removed RPF's borrowings, cash balance and EBITDA from RICH's consolidated financials.

Although not a bank, RPF is a regulated finance company and local regulations for finance companies are drawn along similar lines of those applicable to local banks.

Sri Lanka's Ceylinco March net down 44-pct

ECONOMYNEXT - Profits at Sri Lanka's Ceylinco Insurance fell 44 percent from a year earlier to 2 billion rupees in the March 2019 quarter on and higher costs, interim accounts showed.

Earnings per share were 74.62 rupees, while the firm's share closed at 1,850.10 rupees on Wednesday, flat from Tuesday.

Net written premiums after re-insurance costs grew 7 percent to 8.3 billion rupees in the March quarter from a year earlier.

Investment and other income grew 13 percent to 3.5 billion rupees in the quarter.

Claims and benefits paid rose 14 percent to 4.5 billion rupees. Acquisition costs rose 9 percent to 995.2 million rupees and transfer in life insurance fund fell 1,124 percent to 1.2 billion rupees.

In the three months to end-March 2019, gross written premium in the general insurance business grew 5.3 billion rupees from a year earlier to 5.7 billion rupees, while life insurance premiums rose to 4.2 billion rupees from 3.9 billion rupees in the previous year.

Ceylinco Insurance's total assets grew to 171.5 billion rupees at end-March from 160.9 billion rupees three months earlier, due to an increase in loans and receivables.

Sri Lanka's Hayleys profits down 72-pct in March

ECONOMYNEXT - Profits at Sri Lanka's Hayleys Plc, which is in glove and activated carbon exports, consumer durables, agriculture and power fell 72 percent from a year earlier to 230 million rupees in the March 2018 quarter, as borrowings and interest grew, interim accounts showed.

The group reported earnings of 3.07 rupees for the March quarter.

For the year to March Hayleys reported earnings of 3.54 rupees per share on total profits of 265 million rupees down 74 percent from a year earlier. The stock closed at 150 rupees up 1.35 Tuesday.

Revenues grew 11 percent to 56.4 billion rupees during the March quarter, cost of sales grew at a faster 12 percent to 43.3 billion rupees, direct interest costs grew 26 percent to 349 million rupees, allowing gross profits to grow at a slower 8 percent.

Unspecified other income grew sharply to 1.1 billion rupees from 397 million rupees, while unspecified administration expenses grew 49 percent to 8.0 billion rupees.

In January the group sold Hunas Hotels booking a 445 million rupees.

Net finance costs grew 39 percent to 2.7 billion rupees.

Short and long term borrowings grew by 20.6 billion rupees from 92.6 billion rupees to 113.2 billion rupees during 2018. Full year interest costs grew to 10.5 billion rupees in 2018 from 5.9 billion rupees a year earlier.

Hayleys has taken on debt for acquisitions, including Singer Sri Lanka, a consumer durables firm.

..[T]he Group will continue to take strategic and focused measures aimed at rationalizing finances , however as a Group, we are ready for a challenging macroeconomic environment,” the Hayleys Chairman Mohan Pandithage told shareholders.

Sri Lanka's central bank generated monetary instability in 2018 just as the economy recovered, and the rupee fell from 153 to 182 during 2018, partly worsened by a political crisis.

While a falling rupee will help export business by destroying real salaries of workers, but the currency collapse also kills domestic demand by destroying salaries and savings of an entire population.

Corrective action in the form of prolonged liquidity shortages and capital flight will also add to a demand contraction.