Sri Lanka stocks extend fall despite rate cut in thin trade; rupee steady

Reuters: ** Sri Lankan shares ended weaker on Monday, falling for the second straight session in dull trade as the market shrugged off a widely expected rate cut by the central bank while the rupee closed steady, market sources said. 

** On Friday the central bank cut its key interest rates to support its faltering economy as overall business and consumer confidence slumped following deadly bomb attacks in April. 

** Traders said the Easter Sunday bombings and violence following the attacks, and worries over slowing economic growth 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 bombings, junior finance minister Eran Wickremeratne told Reuters last week. A Reuters poll has forecast growth to slump to its lowest in nearly two decades this year. 

** The central bank chief said on Friday that he expected the economy to grow by 3% or less this year due to the impact of the Easter attacks, and the bank was preparing a downward revision to its earlier projection for 4% growth. 

** The benchmark stock index ended 0.22% weaker on Monday at 5,299.50. It rose 0.3% last week, recording its second straight weekly gain. The bourse has declined 12.44% so far this year. 

** The government’s pension fund has resumed investing in risky assets as the stock market is “extremely undervalued at the moment and is considered a good time to go into”, the central bank governor said. 

** Turnover was 188.6 million Sri Lankan rupees ($1.07 million), less than this year’s daily average of around 546.9 million rupees. Last year’s daily average was 834 million rupees. 

** Foreign investors bought a net 518,433 rupees worth of shares on Monday, extending the year-to-date net foreign outflow to 5.55 billion rupees worth of equities. 

** The rupee ended steady at 176.40/60 per dollar, compared with Thursday’s close of 176.40/55, market sources said. 

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

** The rupee fell 0.06% last week but is up 3.5% 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 bought a net 2.1 billion rupees worth of government securities in the week ended May 22, but the island nation saw a net foreign outflow of 19.1 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 = 176.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal Editing by Frances Kerry)

Sri Lanka’s United Motors tax reversal boosts March profits

ECONOMYNEXT- Profits at United Motors (UML) Sri Lanka rose 9.9 percent to 237.5 million rupees in the March quarter due to a tax reversal, despite trade controls, the firm's interim financials showed.

Group earnings per share for the quarter was 2.35 cents. The UML share was trading at 67.10 rupees a share on Wednesday.

Revenue in March fell 21.9 percent from a year earlier to 2.6 billion rupees, while cost of sales fell 22.1 percent to 2.1 billion rupees, leading to gross profits falling 21.1 percent to 571.2 million rupees.

Sales fell with the government increasing duties and restricting credit for vehicle imports amid a depreciating rupee.

Net finance costs grew 47.8 percent to 93 million rupees.

UML received an income tax reversal of 183.9 million rupees, up from a tax charge of 183.9 million rupees.

The group borrowings grew to 3.6 billion rupees in March from 2.7 billion rupees a year earlier.

Sri Lanka’s Hatton Plantations March profits fall in weak market

ECONOMYNEXT- Sri Lanka's Hatton Plantations (HPL) net losses for the March quarter fell 218 percent from a year earlier to 172.9 million rupees amidst weak sales and production, ahead of a change in ownership, the firm said.

Revenue of the firm fell 11 percent from a year earlier to 1.2 billion rupees while cost of sales grew 18 percent to 1.3 billion rupees leading to gross profits falling 156 percent to 125.7 million rupees.

Administrative expenses grew 77 percent to 84 million rupees due to an increase in the minimum wage.

"(A) depressed tea market and extra provision for retirement benefit obligations severely affected the profitability of the Company," Former Managing Director Vish Govindasamy said.

Higher tea supply from Kenya depressed market prices, he said.

"The market and field conditions were not conducive for the tea industry throughout the year," he said.

The company’s net finance costs rose 72 percent to 16 million rupees.

HPL received a tax reversal of 29 million rupees, compared to an income tax of 74 million rupees a year earlier.

Long-term borrowings of HPL fell to 50 million rupees from 151 million rupees a year ago. Short-term borrowings were 96 million rupees in March down from 101 million rupees a year earlier.

Net assets per share was 6.61 rupees, down from 8.25 rupees.

Lotus Renewable Energy, a part of Singapore's G&G Group, purchased a 51 percent stake in HPL for 1 billion rupees at 8.30 rupees a share in May.

Sri Lanka's Tokyo Cement March quarter net profit down 27-pct

ECONOMYNEXT – Net profit at Sri Lanka's Tokyo Cement Plc fell 27 percent to 182 million rupees in the March 2019 quarter from a year ago and the group ended the year in the red, interim accounts showed.

The group, which operates grinding plants and bulk cement terminals, reported earnings per share of 45 cents for the quarter. The share last traded at 21.20 rupees.

March quarter sales rose 23 percent to 11 billion rupees in the quarter.

Tokyo Cement made a loss per share of 1.20 rupees in the financial year to March 2019 with a net loss of 480 million rupees, against a profit of 2.3 billion rupees in the previous year.