Sri Lanka's Watawala Plantations expect dairy turnaround

ECONOMYNEXT - Sri Lanka's Watawala Plantations Plc, which has interests in oil palm and cattle farming, that benefit from import duty protection, is expecting to return to profit as milk output increase in a dairy start up unit.

The firm made a marginal 6.8 million rupee loss in the March quarter on revenues of 566 million rupees as profits in oil palm was outweighed by diary losses.

Watawala spun off its tea unit which is more exposed to commodity price cycles and wage pressure in Hatton Plantations, and only small volumes of tea remain with the firm.

Managing Director Vish Govindasamy told shareholders that the start-up farm, Watawala Dairies now had 1,128 cows including 602 lactating milch cows.

The unit lost 90 million rupees, including depreciation.

"The loss is in line with the projected loss due to the lower milk yields at the commencement of the lactation cycle," Govindasamy told shareholders in interim accounts filed with the Colombo Stock Exchange.

Milk yields will go up in subsequent lactations, he said. A herd of 240 Australian cattle, which were added to the herd will also improve milk yields, he said.

Palm oil profits also fell he said.

"The lesser prices for crude palm oil compared to the previous year affected the profitability," he said.

"The lower prices were the result of the import duty revisions and the volatility of the crude palm oil prices in the world market.

"The profitability was also impacted by the provision of extra deferred tax of LKR 103 million, owing to the higher tax rate applicable consequent to the new Inland Revenue Act."

Sri Lanka sells Rs90bn 5 and 10-year bonds

ECONMYNEXT - Sri Lanka has sold 90 billion rupees of 5 and 10-year bonds at an auction Monday, data from the state debt office showed.

The debt office sold 50 billion rupees of 4-year, 9-month bonds at a weighted average yield of 10.51 percent, after offering the same amount.

Similar bonds were quoted at 10.42/50 levels are the auction and at 10.40/48 percent levels before the auction, dealers said, indicating that the auction was conducted close to the market.

The debt office also sold 40 billion rupees of 9-year 9-month bonds maturing on 15.05.2028 at an average yield of 10.72 percent.

A close maturity of 01.09.2028 was quoted at around 10.58/78 percent, dealers said.

The auction has to be settled on June 01, 2028.

An estimated 90 billion rupees of bonds were maturing on that date and about 20 billion in coupon payments.

Sri Lanka's John Keells Holdings net up on insurance gain

ECONOMYNEXT - Profits at Sri Lanka's John Keells Holdings Plc rose 100 percent to 9.96 billion rupees in the March 2018 quarter, from a year earlier helped by transfers and one-off gains from its insurance unit.

The group reported earnings of 7.18 rupees per share. In the year to March, it reported earnings of 15.15 rupees per share on total profits of 21 billion rupees, which were up 29 percent from a year earlier.

Group gross profits grew 2 percent in the quarter to 8.6 billion rupees, with revenues up 12 percent to 33.5 billion rupees and costs rising 17 percent to 24.9 billion rupees.

Net finance income was down 3 percent to 2.65 billion rupees.

The group had short term investments of 64.3 billion rupees down from 79 billion a year earlier.

Change in insurance contract liabilities was a positive 1.1 billion rupees, from a negative 1.3 billion rupees a year earlier.

There was another 3.38 billion rupee one off insurance transfer surplus in the quarter. JKH said the one off gains were due to a change in accounting policy mandated by regulations.

Fair value gains rose to 896 million rupees from 473 million a year earlier.

Sri Lankan shares fall to 4-month closing low on foreign selling

Sri Lankan shares fell for a third straight session on Wednesday and posted their lowest close in more than four months, as foreign investors sold diversified stocks such as conglomerate John Keells Holdings Plc and Aitken Spence Plc.

A weaker rupee, political uncertainty and the recent fuel price hike also weighed on sentiment, with investors mostly keeping to the sidelines awaiting cues about the real impact of the floods that hit the island nation over the past week, brokers said.

Foreign investors sold net 1.11 billion rupees worth of equities on Wednesday, turning the year-to-date foreign trade to a net outflow of 900.9 million rupees worth of shares.

The Colombo stock index ended 0.5 percent weaker at 6,420.98. It fell 0.4 percent last week.

Turnover was 1.7 billion rupees ($10.76 million) on Wednesday, well above this year’s daily average of 984.5 million rupees.

“Market came down on heavy foreign selling on John Keells,” said Dimantha Mathew, head of research, First Capital Holdings.

“Foreign investors are worried over the rupee depreciation. Currency depreciation is the major worry for foreigners in any country.”

Analysts said investors are waiting to see the full impact of the floods, which killed 24 people last week.

Shares of John Keells Holdings fell 2.2 percent, Aitken Spence and Company lost 8.1 percent, Sampath Bank Plc ended 1.7 percent weaker and Ceylon Tobacco Company Plc slipped 0.6 percent.

The rupee hit a fresh low of 158.50 per dollar on May 16 on importer demand for the U.S. currency.

Analysts said market sentiment had been dented by concerns over political instability following President Maithripala Sirisena’s decision to suspend parliament last month after 16 legislators from his ruling coalition defected.

On May 8, Sirisena urged his own coalition government and the opposition to end a power struggle to achieve ambitious goals including anti-corruption measures. 

($1 = 158.0000 Sri Lankan rupees) 

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

Sri Lankan shares mark 2-wk closing low; trade dull

Reuters: Sri Lankan shares marked their lowest close in two weeks on Monday with investors mostly keeping to the sidelines awaiting cues about the real impact of the floods that hit the island-nation over the past week.

A weaker rupee, political uncertainty and the recent fuel price hike also weighed on sentiment, brokers said.

The Colombo stock index ended 0.22 percent weaker at 6,453.41. It fell 0.4 percent last week.

Turnover was 397.4 million rupees ($2.52 million), less than a half this year’s daily average of 977.4 million rupees.

“It was a dull day with holiday-sandwiched Monday. Turnover was very low and we might see the real activities after Wednesday,” said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

“The investors are waiting to see the full impact of the floods.”

Sri Lanka’s stock and rupee markets will remain closed on Tuesday for a religious holiday and normal trading will resume on Wednesday.

Heavy monsoon rains have killed 24 people, prompting authorities to warn against landslides and floods in low-lying areas after spill gates had to be opened across the Indian Ocean island, forcing over 70,000 out of their houses.

Foreign investors who were net buyers of 214.1 million rupees worth of equities so far this year were net sellers of 58.2 million rupees worth of shares on Monday.

Shares of Distillers Company of Sri Lanka Plc ended 1.8 percent down, while Sri Lanka Telecom Plc dropped 3.5 percent.

Stock brokers said investors were awaiting clarity on the political and economic front amid the recent fuel price hike, while the depreciation in the rupee also weighed on sentiment.

The rupee hit a fresh low of 158.50 per dollar on May 16 on importer demand for the U.S. currency.

Analysts said market sentiment had been dented by concerns over political instability following President Maithripala Sirisena’s decision to suspend parliament last month after 16 legislators from his ruling coalition defected.

On May 8, Sirisena urged his own coalition government and the opposition to end a power struggle to achieve ambitious goals including anti-corruption measures.

($1 = 157.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Sri Lanka Treasuries yields edge up

ECONOMYNEXT - Sri Lanka's Treasuries yields edged up across maturities at Wednesdays auction, with 26,000 billion rupees of securities being sold, data from the state debt office showed.

The 3-month yield rose 04 basis points to 8.37 percent, with 3.7 billion rupees of bids being accepted after offering 7.0 billion rupees for auction.

The 6-month yield rose 04 basis points to 8.94 percent, with 6.1 billion rupees of securities being sold after 7.0 billion rupees worth was offered.

The 12-month yield rose 03 basis points to 9.73 percent.

Listed Sri Lanka hospitals have strong growth prospects: Fitch

ECONOMYNEXT – Sri Lanka’s listed hospitals will continue to grow strongly given growing demand for private health care, although regulatory price controls will constrain profitability, Fitch Ratings said in a new report.

Long-term demand drivers are intact for private hospital operators, the report on the sector said.

“Increasing demand for private healthcare is driven by Sri Lanka’s aging population and rising incidence of non-communicable diseases (NCDs), which state hospitals are not well-equipped to handle,” it said.

Growth is also supported by the rise in medical insurance penetration.

“Demand for private healthcare in Sri Lanka is likely to improve in the medium to long term with wider acceptance of medical insurance, helped by government-led insurance schemes and increasing personal income.”

However, Fitch Ratings said the shortage of trained professionals could be a growth constraint.

“We expect further expansion of private hospitals to be hobbled by the shortage in qualified physicians and nursing staff. We do not expect the shortage to resolve in the medium term.”

Rising personal incomes also mean private healthcare is within reach of more and more people.

“Also, consumers seek convenience and better service standards that are not met by the public sector due to under capacity,” the report said.

Sri Lanka's urban population, which forms 15% of total population, earns income that is 25%-30% higher that of the rest of the country, and most private operators have located hospitals close to them.

Income levels in rural areas have increased at a faster pace than urban areas in recent years, and decline in the use of outpatient and inpatient care at state hospitals by the rural population in recent years also indicates a shift to private healthcare, Fitch said.

“These create opportunities for private operators to expand outside of the main cities.”

However, there are limits on such growth as qualified and popular consultants are mostly concentrated in urban areas.

“Most of the qualified and established consultants are with the government sector now, and they are concentrated in the Western Province,” Fitch Ratings said.

“Private operators have had to establish their hospitals close to these skilled professionals to obtain their services.”

About 55% of state-sector consultants are attached to hospitals in the Western Province and in the Galle and Kandy districts.

“Any private hospital seeking to expand outside of the Western Province runs the risk of not attracting popular physicians, which may hamper the long-term success of the hospital.”

Hospital operators will continue to face pressures from the depreciation of the Sri Lankan rupee, which increases their cost of sales, and the shortage of trained staff, which compels hospitals to pay a premium to recruit them.

The operators are able to pass on most of these costs to customers and protect margins in the medium term because of the specialised service they provide and the undersupply of providers.

“However, the pass through of costs has been curtailed by government price controls on certain services, such as physician consultations, surgical procedures and lab tests,” Fitch Ratings said.

The government has imposed price caps on certain essential drugs, blood tests, channelling services and medical devices such as lenses used in cataract surgeries and stents used on heart patients to reduce costs for patients.

“The changes reduce the prices of medical devices dramatically, ranging from around 50% for stents and 35% to 75% for lenses, which has reduced the profitability of private hospitals carrying out such procedures,” Fitch said.

“We believe continued intervention by the government via taxes and price controls add volatility to sector profitability, which was previously generally stable.”