SL’s top two state banks take a hit on credit losses

Sri Lanka’s two main state banks, the Bank of Ceylon (BoC) and the Peoples Bank (PB) are to proceed with tough measures to recover thousands of loans taken by businessmen, companies and persons with high political connections since 2011 in which the debtors have not made scheduled payments (for at least 90 days) and was either in default or close to default, official sources disclosed.

Any property mortgaged to the banks as security for any loan in respect of which default has been made will be sold by public auction in order to recover the whole of the unpaid portion of such loan, together with the money and costs recoverable.

Some 33,720 persons comprising both political and non-political loans) have defaulted the BoC in a sum of Rs. 396.78 billion with most not paying a single installment since 2011, a senior official said adding that this was also highlighted in the COPE report released recently.

Four companies and two Non-Governmental Organisations had to re-pay Rs.950 million to the BoC in loans taken this year, he added.

The PB has non-performing loans, with interest, amounting to Rs. 25.865 billion, due from 52 debtors defaulting on their loans, he disclosed. Legal action has been taken against 25 of the defaulters and the others were given an opportunity to pay back the loan under a loan restructuring scheme. They would also be given a grace period to repay the loans, he added. The two state banks will have to write off some these loans if there was no way to recover it from debtors, he said adding that some of these debtors are no more (dead) and several others were absconding.

A senior official of the Central Bank said that because of the non-performing loans ratio going up as a result of default of gold-backed loans and higher interest rates, loan expansion had been affected.
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SL plantations industry profitability to be boosted – Report

Tea, rubber and palm oil, supplemented by coconut, cinnamon and other spices are the main crop interests of Sri Lanka’s listed Regional Plantation (RPCs). The industry continues to be at the mercy of unpredictable weather patterns and labour issues that have collectively dented profitability in the industry.

According to a Bartleet Relegare Research report, the current financial year has been spared of wage negotiations and expectations are for industry profitability to be boosted by a buoyant tea sector. This was indeed the case during the first half of 2014. “However, persistent rainfall has resulted in a drop in output and profitability during the latest quarter.

The rubber industry continues its decline due to bleak global market conditions and unfavourable weather locally.”

The report said that in this backdrop, it is imperative that plantations’counters considered for investment be diversified both in terms of crop mix and also in terms of elevation when it comes to exposure to tea.

Low grown tea accounts for a bulk of the country’s tea production and is known to be distinctly stronger in both flavour and colour. Demand for low grown tea stems from Russia and other CIS countries. High grown on the other hand are known for superior quality, unique taste and aroma and favored by European customers. Mid growns tend to be browner and sweeter than high growns and preferred in Australia, Japan, North America and the UK.

The report said that tea production in 2013 grew by 3.6 per cent to reach an all time high of 340.3 million kg. “Medium grown tea recorded the highest year on year (YoY) growth of 6.8 per cent 54 million kg, while low grown tea production increased by 3.1 per cent to 207.9 million kg and high grown production increased 2.6 per cent YoY to 74.6 million kg.

During the period January – September 2014 Sri Lanka’s cumulative tea production increased by 7.2 million (mn) kg to 255.7 mn kg. High grown and low grown tea recorded YoY growths of 9.1 per cent to 59.8 mn kg and 4.4 per cent to 157.9 mn kg respectively. Mid grown tea recorded a drop of 10.4 per cent YoY to 35.5 mn kg.

The report said that tea prices across all elevations fell from their peaks of last year due to an increase in supply at the auctions and instability in major export destinations such as Syria, Iraq, and Russia. “However, prices have shown a glimpse of recovery during October.”

Sri Lanka recorded its highest ever export revenue from tea last year, the report added, saying that exports were worth Rs. 199.4 billion while volumes dropped marginally by 0.8 per cent to 319.6 million kg.

During the 9-month period January – September 2014, Sri Lanka’s tea exports grew 2.9 per cent to 241.3 million kg. Bulk tea exports have shown a decline while tea in bags and tea in packets have shown a growth. In value terms tea to-date exports have grown 12 per cent to Rs. 158.7 billion.
Russia remains Sri Lanka’s largest buyer, followed by Turkey and Iran.

The most labour intensive of all plantation crops, the tea industry has been plagued with issues ranging from powerful unionised labour to rainfall (either abundance or a complete lack of it). This has rendered the industry extremely volatile and unpredictable in terms of earnings, according to the report according to the report.

“Ceylon Tea is considered to be among the highest quality teas in the world and has managed to consistently command a premium price compared to its global competitors. At US$3.60 per kg Sri Lankan Tea fetches almost twice that of its competitors in India and Kenya.”
However this phenomenon is negated by the fact that Sri Lanka has the highest unit cost of production among all major producers, the report said.

Daily wages of a Sri Lankan pluckier stands at US$5.30, considerably higher than that of Kenya $2.60 and India $2.10 Sri Lanka’s unit labour cost alone is higher than the total unit production cost of most of its competitors.

Sri Lanka’s daily output per plucker is 18 kg day which is significantly lower than the Kenyan output of 48 kg/day and the Indian output of 27 kg/day. “Productivity among male pluckers in Sri Lanka is especially low compared to global peers and also compres to only around 60 per cent – 70 per cent of female pluckers. This is in contrast to the situation in Kenya where male pluckers daily output is significantly higher than female pluckers.”

According to the Planters Association of Sri Lanka, an increase in the daily plucking average by a mere 2 kg/day would bring down the country’s cost of production by 6.5 per cent. This improvement, if achieved, would go a long way in easing the unsustainable costs incurred by RPC’s at present.

Plantation workers wages are revised upwards (usually by 20 per cent) bi annually. As the last revision occurred last year “we expect the current year’s earnings to receive a boost through stability in costs”, the report said.

The local rubber industry has continued to decline in line with the current global stagnation of the global market for the commodity the report said, highlighting that the weak demand conditions in China and the E.U coupled with excess supply.

“Adverse weather conditions have hampered tapping during most of the year, bringing down output as many small holders have resorted to discontinue tapping further. The slight price recovery witnessed recently has been a result of this reduction in supply.”
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Troubled Colombo bourse may see state intervention

Share prices at the Colombo bourse which have slumped in the past two weeks due to political uncertainty may prompt government intervention in the market next week, brokers and analysts said.

The All Share Index (ASI) and the S&P SL20 has been on a roller coaster ride since former Health Minister Maithripala Sirisena announced his shock entry as the main opposition candidate pitted against President Mahinda Rajapaksa.

On Friday, the ASI closed at 7,238 points, marginally down 0.22 per cent from Thursday’s close and from 7,150 on November 21 when Mr. Sirisena made the announcement. The S&P SL20 gained by 0.12 per cent to 4,061 on Friday while turnover for the day was over Rs. 2 billion.

Analysts said in a bid to give confidence to the market, investors and also boost the ruling party camp, speculation was rife of EPF and ETF this week to turnaround the negative trend.

Since both political camps began taunting each with accusations and counter-accusations, uncertainty has flowed across the Colombo bourse.
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Eden Resort unveils new logo; adjust name

Eden Resort & Spa unveiled its new logo recently also revealing an adjustment to its name, now making it ‘The Eden Resort & Spa’.

All properties under the Browns Hotels and Resorts chain will now have a common denominator, ‘THE’, which will be added to their titles.

The five-star luxury hotel, part of the Browns Hotels & Resorts chain is located along the golden mile in Beruwela. Newly refurbished, the 158-room hotel’s structural footprint is unique and takes on the shape of a horseshoe.

Apart from plush, well-furnished rooms, The Eden also offers a variety of dining options and bars, adding to its wide array of services.

Browns Hotels and Resorts is owned by Browns Investments, which is a subsidiary of Brown & Company PLC. Its ultimate parent company is Lanka ORIX Leasing Company (LOLC). Browns Hotels and Resorts’ properties currently in operation include: The Eden Resort & Spa, Dickwella Resort & Spa and The Paradise Resort & Spa. The Company also has exciting new plans on the horizon, with new properties planned for in Beruwela, Passikuda and the Maldives.



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ACAP eyes leisure, but passive to stock broking

By Azhar Razak

The Chairman of Asia Capital Plc (ACAP), J H P Ratnayeke says that given the docile stock market environment, it is likely that the group would remain only passive participants in the stock broking sector, until such time a conducive environment develops to compel aggressive involvement in developing ist prospects in that space. Presenting his message to the stakeholders in the Annual Report 2013/14 released last week, Ratnayeke said that with the campaign to deepen their exposure in the leisure sector being the main thrust of their medium term plans, the group has additionally mapped out suitable strategies that justify the development of its other business interests as well.

“On the investment banking side, we are committed to play an active role in exploring the diversity of the segment, in particular the corporate finance space, as we strive to re-engineer ourselves as a multi-functional investment banking unit ideally positioned to complement the progressive development of the national economy,” the Chairman said.

Commenting on the stock broking sector, Asia Capital Plc Group Director/CEO Stefan A Abeyesinghe said that following a relatively sluggish start to the year, the performance of the ACAP Stock Broking arm showed promising results in the latter half of the financial year.

“The country’s stock markets rebounded well in December 2013 in the lead up to a buoyant market conditions seen in the first quarter of 2014. Stock Broking arm was thus able to secure a notable reduction in the sector losses from Rs.134 million in the previous year to Rs.84 million as at 31st March 2014,” he said.

With regard to the Stock Broking arm, Abeysinghe said the group expects to maintain its established presence while investigating the possibility of diversifying interests into related business segments, where strategic equity partnerships or business tie-ups with stakeholders who have a vested interest in Sri Lanka’s securities industry would be sought.

“While complementing the group expansion goals, equity based tie–ups of this nature are deemed to limit ACAP’s capital outlay while supporting the long-term debt management strategies of the group,” he explained.

During the year ended 31st March 2014, the ACAP group recorded a 14% reduction in the group loss from Rs.727 million in the previous year to Rs.622 million as at 31st March 2014 helped by a 7% growth in its topline.

Abeysinghe further noted that the heightened focus on developing the leisure arm would tantamount to both short-term and medium-term commitments by ACAP to enhance the current room inventory.

“With the expansion drive well underway and much of the financial commitment already made for a number of pipeline projects, the leisure management arm is on course to accomplish the set deliverables in terms of room capacity by 2017. Moreover, it is likely that in seeking to better manage properties under the leisure sector, a possible re-branding exercise would be initiated to consolidate all properties under a single umbrella. Such measures would undoubtedly be associated with further capital raising
strategies that would yet again reconstitute the composition of the group’s equity holdings in the years ahead,” the Director/CEO emphasized.
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Singer Finance becomes Sri Lanka’s First Finance Company to Introduce Credit Cards

The Central Bank of Sri Lanka (CBSL) has licensed Singer Finance PLC to issue payment cards, both Debit Cards and Credit Cards, making the company the very first non-banking financial institution in Sri Lanka to be able to do so. The pioneering company is a subsidiary of retail giant, Singer Sri Lanka, and is leveraging the strength and reach of its parent company in order to bring flexible financial solutions to Sri Lankans all across the island.

Highly regarded for its innovative approach to financial services, Singer Finance offers a range of products and services including fixed deposits, business loans, consumer finance, foreign currency exchange, leasing, and hire purchase.

The company has also introduced group sales to its portfolio, a unique facility that gives staff at reputed public and private organizations the ability to pay for consumer products in monthly instalments. Singer Finance is the market leader in this segment, with employees at over 400 institutions island-wide making use of this convenient facility.

The company has steadily increased its country-wide reach over the past ten years, and now has 18 Branches, 2 Service Centres and counters at 15 Singer Mega outlets across the island, including in Jaffna. With customer convenience at the heart of the company’s value proposition, Singer Finance also accepts payments at over Singer 400 outlets island-wide. This unrivalled level of service is empowered by the industry’s best online, real-time payment system.

The Singer Finance Board consists of Dr. Saman Kelegama (Chairman), Mrs. Marina A Tharmaratnam

(Independent Director), Mr. J Setukavalar (Independent Director), Mr. Gavin J Walker (Director), Mr. John Hyun (Director), Mr. Y C Joe Kan (Director), Mr. Janaka Mendis (Director), Mr. R S Wijeweera (Director/CEO), Mr. K K L P Yatiwella (Alternate Director), Mr. Shyamsunder Ramanathan (Alternate Director), and Mr. Premalal De Silva (Alternate Director).
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Sri Lankan bourse slightly weaker; block deals push turnover; rupee-forwards steady

Dec 5 (Reuters) - Sri Lankan stocks edged down on Friday with low retail participation, but block deals pushed the turnover, while some investors were cautious due to political uncertainty ahead of the Jan. 8 presidential poll.

At 0557 GMT, the main stock index was down 0.28 percent, or 20.09 points, at 7,234.71.

"The turnover was up on a block deal if you take out the block deal the rest of the market was very slow as retail investors are staying away waiting to see the direction," said Reshan Kurukulasuriya, chief operating officer of Richard Pieris Securities (Pvt) Ltd.

Nine loyalists from President Mahinda Rajapaksa's United People's Freedom Alliance, including Health Minister Mithripala Sirisena, have defected since Rajapaksa announced snap elections last week. Sirisena resigned to contest against Rajapaksa as the consensus candidate of a united opposition.

Speculation over more defections also weighed on sentiment, analysts said.

Turnover stood at 1.62 billion rupees ($12.3 million), with 89.73 million shares changing hands.

Four-day rupee forwards traded steady as importer dollar demand offset greenback sales by exporters, dealers said.

The spot currency and three-day forwards, or spot-next, were not traded after the central bank capped the currency at predetermined levels to prevent volatility.

Central bank officials were not available for comment.

Dealers said four-day forwards traded little changed at 131.95/132.05 per dollar at 0603 GMT compared with Thursday's close of 131.95/132.00. 

($1 = 131.3000 Sri Lankan rupee) 

(Reporting by Ranga Sirilal; Editing by Anand Basu)