Inflation drops significantly in February 2015

Inflation, as measured by the change in the Colombo Consumers’ Price Index (CCPI) (2006/07=100), which is computed by the Department of Census and Statistics, decreased to 0.6 per cent on year-on-year basis in February 2015, the lowest level recorded since February 2004. Annual average inflation also declined from 3.2 per cent recorded in January to 2.9 per cent in February 2015.

CCPI declined significantly by 2.3 per cent in February 2015 compared to the previous month. The downward revision of fuel prices effected during January 2015 and the reduction of price/import duty of both food and non-food items as proposed in the Interim budget 2015 contributed heavily towards this monthly decline in the index . Liquid fuel, LP Gas and bus fares in the Non-food category recorded considerable declines in prices. This monthly decline in inflation was further supported by the decline in the prices of food items such as rice, most varieties of fish and vegetables. However, prices of eggs, coconuts, fruits and some varieties of vegetables recorded increases during the month. 

Within the Non-food category, sub groups of Housing, Water, Electricity, Gas and other Fuels; and Transport declined significantly reflecting the impact of recent downward administered price revisions while prices in Clothing and Footwear sub group increased. However, sub groups of Furnishing, Household Equipment and Routine Household Maintenance; Health; Communication; Recreation and Culture; Education; and Miscellaneous Goods and Services remained unchanged during the month.

Core inflation, which reflects the underlying inflation in the economy, declined significantly from 2.1 per cent in January 2015 to 0.8 per cent in February 2015 on a year on year basis. Annual average core inflation during February 2015 was 3.2 per cent, compared to 3.4 per cent recorded in January 2015.

Hayleys Rs 2 b debenture full

Hayleys PLC Rs 2 billion worth of debenture has been oversubscribed yesterday.The company has received applications for over Rs 2 billion for the above debenture issue and therefore the issue closed yesterday as per the prospectus. The basis of allotment will be notified to the Colombo Stock Exchange in due course. The company issued 20,000, 000 Senior, Unsecured, Listed, redeemable debentures at an issue price of Rs. 100 each
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Singhe Hospital to raise Rs 250 m in IPO

In a move to raise capital for expanding its operations, Singhe Hospital Ratnapura will begin initial public offering on March 12.

The main objective of the IPO is to raise capital for new investments while maintaining the gearing ratio at optimal level.It is expected to raise Rs.250 m by issuing 100 m shares at Rs.2.50 each.The share issue amounts to 25% of the total shares and the banking partner of this venture will be the Bank of Ceylon while the Merchant Bank of Sri Lanka is managing the share issue.

"Singhe Hospital is in a competitive stance with any other leading private hospital in terms of facilities, technology and hospitality. The number of patients visiting the hospital is increasing day by day. It is a clear indication that Singhe Hospital is a trusted tertiary care institute providing top notch medical services not only in Sabaragamuwa but also in the island at large," Chairman A.M. Weerasinghe said.Singhe Hospital has recorded success in every sector within two years. Particularly, higher performance in finance, marketing and operations contributed in this respect. Currently Singhe Hospital records an annual turnover of more than Rs 220 m. In comparison to the first year of its operations this is nearly a 560% growth.

Singhe Hospital is the brainchild of A.M. Weerasinghe, the founder of Royal Ceramics fame. Many of Weerasinghe's business ventures saw tremendous success. Presently, he serves as a director of Royal Ceramics too. Previously he was the chairman of Royal Ceramics and LB Finance.
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PABC posts Rs 415.2 m PAT in 2014

Pan Asia Bank recorded an impressive 265 % growth in profit after tax for the financial year ended December 31, 2014 to post Rs. 415.2 million on the back of strong core-banking performance, non-fund based income and efficient cost management.

The pre-tax profit too grew by three folds to Rs. 538.4 million. These results were achieved in spite of substantial provision for impairment on loans and other losses of Rs.815 million.

The bank's December quarter (4Q'14) results too followed suit with a profit of Rs.138.1 million for the quarter setting the stage for a sustainable growth momentum in the years ahead. The bank's top line measured by the Net Interest Income (NII) rose by a commendable 350 % year-on-year (yoy) in the 4Q'14 to Rs.850.1 million and 31 % for the whole year to Rs. 2.7 billion due to significantly higher growth in loan book and prudent asset and liability management.

Loans and receivables has grown by 34% to Rs. 63.3 billion which is by far the highest in the industry amid lackluster demand for credit in the economy as the private credit grew by only 9 % in 2014. The bank has successfully managed the narrowing banking sector margins by increasing its Net Interest Margin (NIM) by 13% to 3.82% as the drop in the bank's cost of deposits outweighed the drop in loan yields in the lower interest environment. 

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SEC to give investors a fair deal

Securities and Exchange Commission Chairman Thilak Karunaratne said the SEC's objective is to formulate a well regulated capital market where all the investors get a fair deal.

The SEC is working on addressing the existing weak points by bringing more amendments to our Act. It will give us more strength and teeth to take care of shortcomings in the capital market.

Karunaratne also added that the Securities and Exchange Commission was looking forward to closely working with the Colombo Stock Exchange.
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Janashakthi records Rs. 8.9 bn GWP

Janashakthi Insurance PLC recorded profit before tax in excess of LKR 1 Bn as of December 31, 2014, showing healthy growth amidst regulatory change in the insurance sector.

As the company celebrated two decades of existence, Janashakthi posted a Gross Written Premium of LKR 8.9 Bn as of December 31, 2014, compared to LKR 8.7 Bn in the previous year.

The Gross Written Premium of Non-Life Insurance segment of the company was LKR 6.8 Bn compared to LKR 6.5 Bn previous year. This is a 4% year on year growth in the Non-Life Insurance Business. This growth has been achieved mainly due to significant contribution made by the Non Motor Business sector.

Janashakthi performed exceptionally well in the Non motor segment, with the company recording 14.47% growth, particularly impressive considering that overall industry growth was 1.47%. The Motor business in particular performed well in the latter part of the year, growing even in an industry which saw sluggish growth.

Janashakthi’s assets base grew to LKR 20.8 Bn compared to LKR 18.6 Bn, an impressive feat given prevailing industry conditions. Net assets per share rose to LKR 14.34 compared to LKR 12.48 the previous year indicating the sustainable value creation by the company towards its stakeholders.

This growth was reflected in Janashakthi’s share prices. Market price per share showed strong growth at LKR 23.20 compared to LKR 12.70 the previous year, reflecting market confidence in the brand.
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Fitch affirms Distilleries Company of Sri Lanka at ‘AAA(lka)’/Stable

Fitch Ratings has affirmed Distilleries Company of Sri Lanka PLC’s (DIST) National Long-Term Rating at ‘AAA(lka)’. The Outlook is Stable.

Leading Alcohol Manufacturer: DIST continues to be the market leader in alcoholic beverage production in Sri Lanka due to its strong brands, which drive demand and access to retail points across the island. DIST’s diversified product portfolio includes its mass market Extra Special Arrack brand, which accounts for about 80% of sales, as well as licensed international brands channelled through its subsidiary Periceyl (Pvt) Ltd. The government’s plans to impose a minimum tax of LKR200m per month on liquor manufacturers will deter new players and adversely impact the profitability of smaller players. This is likely to allow the larger producers such as DIST to gain market share.

As of the latest published statistics, DIST accounted for 53% of Sri Lanka’s total alcoholic beverage production and 79% of the country’s total arrack production. DIST’s arrack production accounts for over 95% of its volumes.

Positive Outlook for Demand: Government measures including increases in public-sector salaries and allowances, and reductions in the prices of essential goods, fuel and electricity are likely to increase real disposable income, which would lead to an uptick in spirit consumption.

Increasing Preference for Beer: Beer demand continues to grow despite an overall decline in the domestic alcoholic beverage industry. Latest statistics show domestic beer production rose 21% in 2013, compared with growth of 14% in 2012. This reflects increasing demand for strong beer (over 5% alcohol content), which accounted for 89% of total beer production at end-2013. This compares with declines in arrack production of 12% and 9% over 2013 and 2012, resulting in a market share contraction for arrack, the main market for DIST.

Resilient Operating Profile: Profitability remains resilient, reflected in a high and improving EBITDA margin of 35.6% for the financial year ended 31 March 2014 (FY14), up from 33.5% in FY13, due to sourcing strategies and DIST’s ability to pass on tax increases to the consumer.

Regulatory Risk: The industry is highly regulated, with a complete ban on advertising and licensing across the value chain acting as a barrier to entry. The industry is also characterised by high and frequent tax revisions, putting increasing pressure on industry players; this risk is partially mitigated by liquor’s contribution to government coffers, with liquor taxes expected to account for an estimated 5.1% of total government revenue in 2014.
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