SL’s largest cement producer renews calls for level playing field

The country’s largest cement manufacturer Tokyo Cement Company (Lanka) PLC (TKYO) renewed its calls for the government to create a level playing field for the cement industry, which is being taken advantage of by importers due to unbalanced policies. ‘‘An unequal playing field has been created through the current national policy that imposes price controls on cement, while allowing unlimited, duty-free entry for imported varieties,” TKYO Managing Director S.R. Gnanam said. A maximum retail price of Rs.870 per bag of cement was set by Finance Minister Ravi Karunanayake as a populist policy in the 2015 interim budget when the prevailing prices were around Rs.930-940. He also instructed the state-owned cement factories to sell a bag at Rs.760-770. 

Gnanam noted that with the depreciation of the rupee over the past financial year, the cost of importing clinker and other raw material required to manufacture cement has gone up. “Domestic cement manufacturers could not adjust the retail prices to reflect the cost increase. Imported cements on the other hand, did not face such a contingency as these cements are not manufactured in Sri Lanka and do not face domestic conditions,” he said. 

Gnanam noted that the importers do not have any capital investment costs or manufacturing, environmental and labour standards imposed on domestic manufacturers, which further worsen the problem. However, the cement price control may have contributed to a sharp increase in household construction. 

“The demand for cement maintained an upward trajectory on the back of private sector demand for concrete in the Western Province and the cement demand by households in the regions, contributed directly towards our top line growth,” Gnanam said. He noted that there was a 7-10 percent increase in demand for the household sector, even from the North and East. He added that the demand for cement reached six million tonnes in 2015/16 compared to 5.4 million tonnes in 2014/15. However, Gnanam reiterated the need to reintroduce market forces. “Given the large inflows of imports, supply shortages are unlikely in the future. 

Therefore, the market forces should be allowed to set cement prices and not be artificially propped up to benefit foreign manufacturers that are not accountable under national regulations,” he said. The current government has been highlighting the need to empower local industries. Further, while most other industries benefit from protectionism, a policy which the current regime had promised to remove but had failed to do, the cement industry seems to be a victim of the other extreme of the trading spectrum. - See more at: http:/

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Daya Group in takeover bid on Blue Diamonds?

In an interesting development, the Colombo bourse was yesterday informed of the purchase of shares in Blue Diamonds Jewellery Worldwide PLC (BLUE) in excess of 10 percent by Promodya Manjaree Kilittuwa Gamage, who is believed to be the daughter of Primary Industries Minister Daya Gamage. A stock market filing by SC Securities said its client P.M.K. Gamage as at July 12, 2016, controlled 22,395,344 shares of BLUE, which represents 10.8 percent of the issued shares of the company. However, market sources said P.M.K. Gamage, who is believed to be acting in concert with Bimputh Finance PLC—a Daya Group company— may have held more than 15 percent of Blue Diamonds as at yesterday (July 14). As at March 31, 2016, P.M.K. Gamage held 2.77 percent of BLUE as the fourth single largest shareholder of BLUE and featured as the seventh largest shareholder of Bimputh Finance PLC with a stake of 7.57 percent. 

The Securities and Exchange Commission has currently launched an investigation into Blue Diamonds of possible misappropriation of shareholder funds. BLUE currently doesn’t have a controlling shareholder, which makes it an open candidate for acquisitions. Chinese national Xia Liqiang, who currently functions as BLUE Chairman, holds 15.46 percent stake as the single largest shareholder of the company. He also holds another 10.56 percent stake through V.V.S. Lanka Holdings. Informed market sources said Daya Group has recently shown interest towards investing in a gem-cutting venture.

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Hayleys Fibre to dispose 6-acre property for Rs.420mn to Alumex

Hayleys Fibre PLC, a unit of the Hayleys group, has decided to dispose of its six-acre freehold property in Ekala for a consideration of Rs.420 million to Alumex PLC, another Hayleys group company, a disclosure made by the company to the Colombo Stock Exchange (CSE) said. For this purpose, the company has called for an Extraordinary General Meeting on July 27 to obtain the approval from the shareholders as the transaction value exceeds 50 percent of the total value of the assets of the company – a major transaction under the Companies Act. Further, the CSE listing rules also require the shareholder nod for the transaction as its value exceeds one-third of total assets. As of March 31, 2016, Hayleys Fibre had an asset base of Rs.583.9 million. 

The related party transaction will result in a thumping Rs.233.1 million profit as the carrying value of the said property in the books of Hayleys Fibre is Rs.186.9 million. The land, which in full extent, six acres, one rood and 7.9 perches, situated on the Minuwangoda Road, Ekala Road, Ja-Ela, had not been utilized for the company’s core business and rented out to third parties. Hayleys Fibre, a manufacturer and exporter of traditional coir products, said it would invest the sales proceeds in its core business to generate adequate returns. 

For the year ended March 31, 2016, the company made a net profit of Rs.16.4 million with an earnings per share of Rs.2.05. “The company is currently reviewing opportunities in business integration and consolidation thereof,” the disclosure said. The Hayleys Fibre share was trading at Rs.91.70, up Rs.2.90 or 3.27 percent yesterday. The buyer, Alumex PLC on the other hand, will use the property for its business expansion. As of March 31, 2016, Hayleys PLC had a 65 percent stake in Hayleys Fibre and 51 percent in Alumex PLC. www.dailymirror.lk

Fitch rates Sri Lanka’s USD Bond ‘B+(EXP)’

(LBO) – Fitch Ratings has assigned Sri Lanka’s upcoming US dollar-denominated bonds an expected rating of ‘B+(EXP)’.

The ratings agency said the expected rating is in line with Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘B+’ with a Negative Outlook.

“The rating would be sensitive to any changes in Sri Lanka’s Long-Term Foreign-Currency IDR,” Fitch Ratings said.

“In February 2016, Fitch downgraded Sri Lanka’s Long-Term Foreign-Currency IDR and Local-Currency IDR to ‘B+’ with a Negative Outlook.”

Sri Lanka imposes maximum price for 16 essential items

(LBO) – The controlled prices of 16 essential items were announced by the Minister of Industry and Commerce Rishad Bathiudeen today morning.

The Gazette is expected tomorrow and the maximum retail prices will be effective immediately.

The Items are:

1. Chicken Rs 410 per Kilo, Rs 495 per Kilo (skinless)
2. Red Dhal Rs 169 per Kilo
3. Sprats (Thai) Rs 495 per Kilo – Sprats (Dubai) Rs 410 per Kilo
4. Gram-Chickpeas Rs 260 per Kilo
5. Green moong/Green Grams Rs 220 per Kilo
6. Canned Fish Regular 480 grams Rs 140 (105 Grams– Rs 70)
7. White Sugar Rs 95 per kilo
8. White Flour Rs 87 per kilo
9. Full cream milk powder – imported Rs 810 per Kilo – Domestic Rs 735 per Kilo
10. Potatoes – Local – No control price Potatoes – imported – Rs 120 per kilo
11. B Onions imported – Rs 78 per Kilo
12. Dried chillies – Rs 385 per Kilo
13. Dried Fish – Katta – Rs 1100 per Kilo
14. Dried Fish – Salaya– Rs 425 per Kilo
15. Maldive fish –Rs 1500 per kilo
16. Sustagen – Rs 1500

Sri Lanka stock exchange promotes mobile phone trading

ECONOMYNEXT - The Colombo Stock Exchange (CSE) will conduct training programmes around the country to educate investors on the use of mobile phone trading applications, given the increasing use of smartphones which enable investor to place orders in real-time.

The facility requires a web-enabled smartphone and a stockbroker trading account, the CSE said in a statement.

The same security protocols adopted by Web-based portals and other e-commerce applications are used for mobile trading, it said.

The applications offer a range of features that include daily market summaries, portfolio management, buy and sell options, ability to track and view the history of orders, analyze gains and losses in real-time and breaking corporate news alerts.

The training, conducted free-of-charge, will be in Sinhala, Tamil and English mediums and be conducted in Colombo, Kandy, Ratnapura, Matara, Anuradhapura, Negombo, Kurunegala and Jaffna.

The popularity of smartphones is rapidly increasing and with that, tech savvy investors around the world have taken to mobile trading as a way to conveniently trade stocks using their smartphones. This is reflected in the growth of mobile applications as a whole.

“With the usage of smartphones growing worldwide, where devices are increasingly utilized to access online services and information, it is only just that we offer investors the convenience of trading from their mobiles,” said Niroshan Wijesundere, Head of Market Development at CSE.

“A common problem for investors has been gaining access to sources through which orders can be placed in real-time - in other words, the lack of the opportunity to trade live, from wherever they are located,” the CSE statement said.

“Given the active and sometimes volatile nature of the current market, an opportunity could be lost or capitalized on in a matter of seconds. Getting the timing right in terms of when to buy or sell a stock could therefore be as crucial as deciding what shares to buy.”

Sri Lanka company earnings growth seen slowing

ECONOMYNEXT – Earnings growth of Sri Lankan companies listed on the Colombo Stock Exchange are likely to slowdown in the second and third quarter of 2016, stockbrokers First Capital Equities said.

They attributed the slowdown to the likely slowdown in consumer demand resulting from the tighter monetary policy, higher interest rates and price increases in imports because of the depreciation of the rupee.

“However, we believe banking sector is likely to provide stability with higher margins while construction and building material companies may continue to show strong performance with the government’s infrastructure drive,” First Capital Equities said in a research note

The brokers forecast overall market earnings growth for the December 2016 and March 2017 financial years to be at 4%-5% year-on-year.

“We also expect market earnings to accelerate from 2H2017E onwards resulting in earnings for December 2017E / March 2018E growing by 11%-12% YoY,” the report said.

First Capital Equities said market returns will be bullish only in the mid-term and “conditionally on the longer term” if interest rates fall.