Sri Lankan shares end at over one-month closing low

Reuters: Sri Lankan shares edged down on Tuesday as investors sold banking and large cap stocks amid lack of new catalysts for buying risky assets, and on concerns over foreign investment outflows and rising interest rates.

The benchmark Colombo stock index ended 0.04 percent, or 2.34 points, weaker at 6,550.51, its lowest close since April 29. The index declined 0.94 percent during last week.

"Not much of retail activities in the market," said Atchuthan Srirangan, a senior research analyst at First Capital Equities (Pvt) Ltd.

Analysts said market sentiment was weak as investors were waiting for catalysts such as a big foreign direct investment or initial public offering or inflows from the International Monetary Fund.

Rising interest rates also weighed on the market with treasury bill yields rising between 5 and 27 basis points to near three-year highs at a weekly auction last Wednesday, despite the central bank leaving key policy rates steady for a third straight month.

Foreign investors have been net sellers of 5.58 billion rupees ($37.75 million) worth of equities so far this year, but they bought a net 49.7 million rupees worth of shares on Tuesday, the first net foreign inflow in five straight sessions.

Turnover stood at 700.3 million rupees, lower than this year's daily average of around 795 million rupees.

Shares in biggest listed lender Commercial bank of Ceylon Plc fell 0.93 percent while those in Hemas Holdings Plc dropped 2.93 percent and Distilleries Company of Sri Lanka fell 0.92 percent, dragging the index down.

Shares in top conglomerate John Keells Holdings, ended steady and accounted for 48 percent of the day's turnover.

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)

CEAT Sri Lanka to raise radial tyre capacity by 75-pct

ECONOMYNEXT - CEAT Sri Lanka has announced it will invest Rs 800 million over the next 12 months to increase radial tyre production capacity by 75 per cent, to 70,000 tyres a month from 40,000 to meet growing local and export demand.

The company said in a statement it currently has a 30% share of the radial tyre market and supplies nearly half of Sri Lanka’s overall requirement of pneumatic tyres.

About a third of CEAT Sri Lanka’s current tyre production is exported to 15 countries in South Asia, the Middle East, Africa and the Far East.

The new expansion comes two years after CEAT Sri Lanka commissioned a Rs 600 million radial tyre manufacturing plant at the company’s Kelaniya complex to produce tyres for cars and sports utility vehicles (SUVs).

“Our new investment entails a virtual replication of the plant we opened in July 2014, with new hi-tech machines,” CEAT Sri Lanka Managing Director Vijay Gambhire said.

“This bold decision to almost double production reflects our commitment to Sri Lanka and our confidence in the potential of our tyres to compete with global brands in the domestic and export markets. With this investment, CEAT Sri Lanka’s total investment will rise to Rs 3.8 billion.”

The new machines to be installed would produce 13 sizes of radial tyres, increasing production of several existing sizes as well as adding new sizes to the company’s radial tyre portfolio, which already comprises of 33 sizes - 20 for cars, eight for vans and five for SUVs, Gambhire said.

CEAT Sri Lanka Vice President Sales, Marketing & Exports Ravi Dadlani said the increase in production capacity and the introduction of new sizes will give the firm the potential to double market share.

Among the 13 CEAT radial tyre sizes to be manufactured when the latest phase of expansion is complete, are 31x10.5 R 15 All-Terrain tyres, 265/70R16 H/T, 205/75R 14 H/T and 205/75R15 H/Ttyres under CEAT’s Czar brand, and two export sizes - 215/70 R 15 C and 225/70 R 15 C.

Sri Lanka's Distilleries group net up 9.8-pct

ECONOMYNEXT - Profits at Distilleries Company of Sri Lanka which has interests in alcohol, insurance, plantations and telecoms rose 9.8 percent to 1.358 billion rupees in the March 2016 quarter from a year earlier, helped by the beverage business.

The group reported earnings of 4.53 rupees per share for the quarter. In the year to March profits of 21.16 rupees per share on total profits of 5.6 billion rupees, which were down 32 percent.

At the core alcohol firm net revenues (without taxes) went up 40 percent to 6.2 billion rupees, cost went up at a faster 57 percent to 3.3 billion rupees, but gross profits also rose 24 percent to 2.8 billion rupees.

At group level, revenues went up 28 percent to 9.3 billion rupees, cost and claims went up 27 percent to 6.2 billion rupees, and gross profits rose 30 percent to 3.1 billion rupees.

For the full year, beverages made pre-tax profits of 8.6 billion rupees, up from 8.3 billion, plantations lost 430 million rupees, worsening from 106 million rupees.

Telecoms lost 587 million rupees, a little down from 691 million a year earlier and financial services made profits of 252 million rupees, up from 187 million and diversified made profits of 626 million up from 549 million.

Sri Lanka dockyard seeks to diversify away from offshore vessels

ECONOMYNEXT – Colombo Dockyard is looking to diversify away from making offshore support vessels (OSVs) for the petroleum industry and build other types of vessels like passenger craft given the prolonged slump in oil prices, its chairman has said.

“We have already received several inquiries from adjacent countries in connection to the assembly of passenger boats, barges and other vessels unrelated to oil drilling and OSVs,” Toru Takehara said.

Colombo Dockyard has in recent years specialised in the manufacture of offshore support vessels catering to the oil industry and in oil drilling and exploration operations in particular.

“Given the performance of oil prices, which dropped to historic lows in 2015, demand for OSVs has negatively affected our performance,” Takehara told shareholders in the firm’s annual report.

The ship yard industry performance is currently linked very strongly to the performance of oil markets and oil prices will stay at reduced levels over the short-medium term horizon, he said.

The yard reported a loss last year after Singaporean clients serving the oil industry cancelled one OSV and negotiated reduced prices for three remaining vessels to be delivered.

Sri Lanka Access Engineering March net almost stagnant

ECONOMYNEXT – Sri Lanka’s Access Engineering group’s March 2016 quarter net profit went up 1.5% to 642 million rupees from a year ago with most of the growth coming from the core construction business and also the Sathosa Motors subsidiary.

Sales fell 2.4% to 4.56 billion rupees during the period, according to interim results filed with the stock exchange.

March quarter earnings per share were 64 cents.

EPS in the year ending 31 March 2016 was 2.47 rupees with net profit up 5.3% to 2.5 billion rupees from the year before while sales rose 6.9% to 17.7 billion rupees.

Stock market analysts said Norges Bank, Norway’s central bank which manages the government pension fund, one of the largest sovereign wealth funds, had increased its stake in Access to 21.4 million shares or a 2.1% stake.

JKH Chief welcomes Govt.’s thrust for PPPs

• Says move will give rise to opportunities for Group given strong balance sheet

Premier blue chip John Keells Holdings Chairman Susantha Ratnayake has welcomed the Government’s thrust on Public-Private Partnerships and the policy decision will widen opportunities for the Group.

“The economic policy pronouncements of the Government signalled its desire to encourage public-private-partnerships and exit investments  in non-core public owned interests and this, we believe, will give rise to opportunities for the Group, given our strong balance sheet,” JKH Chairman Ratnayake has said in his review in the company’s FY2016 Annual Report released yesterday.

“The Group is currently evaluating significant investment opportunities across its industry groups,” he said.

“We are confident that investments which we are making today in pursuing a sustainable long-term future will result in improved returns on our capital employed in the medium to long term,” Ratnayake added.

JKH, according to Ratnayake, despite facing a challenging operating environment in FY2016, posted satisfactory underlying business performance.

During the financial year ended 31 March 2016, JKH Group posted a revenue of Rs. 93 billion, up by 2% and a Group profit before tax of Rs. 19.12 billion, up by 3% from the previous year.

JKH’s bottom line was down 2% to Rs. 14 billion. However, recurring profit attributable to equity holders of the parent rose by 5%to Rs.13.85billion. JKH Group was employing 19,522 people up from 18,981 a year earlier.

Ratnayake said that from a portfolio and diversificationperspective, the investments in JKH’s ConsumerFoods and Retail businesses have borne fruit,contributing towards a diverse stream of cashflows and a more balanced portfolio, where anincreasingly higher proportion of profits aregenerated from businesses with significantlong-term growth potential.

This year’s Report of JKH has been prepared in conformance with the Integrated Reporting Framework of the International Integrated Reporting Council which focuses on the reporting of the Group’s value creation process.

During FY2016, JKH’s Leisure industry group reported revenues, including share of revenues from associated companies, of Rs.24.31 billion and a PAT of Rs.4.37 billion, contributing 23% and 28% to Group revenue and PAT respectively. The industry group continued to maintain its position as the largest contributor to Group PAT.

The Transportation industry group reported revenues, including the share of revenues from the associate companies, of Rs.16.83 billion and a PAT of Rs.2.45 billion, contributing 16% each to Group revenue and PAT respectively.

The Property industry group reported revenues of Rs.4.34 billion and a PAT of Rs.1.59 billion, contributing 4% and 10% to Group revenue and PAT respectively.

The Consumer Foods and Retail industry group recorded revenues of Rs.36.46 billion and a PAT of Rs.3.23 billion, contributing 35% and 20% to Group revenue and PAT respectively.

The Financial Services industry group recorded revenues, including the share of revenues from associate companies, of Rs.11.90 billion and a PAT of Rs.1.72 billion, contributing 11% each to Group revenue and PAT.

The Information Technology industry group recorded revenues of Rs.8.26 billion and a PAT of Rs.96 million, contributing 8% and 1% to Group revenue and PAT respectively.

The Plantation Services sector recorded revenues of Rs.2.42 billion, contributing 2% to Group revenue, and a PAT of Rs.6 million.

JKH’s total shareholder return (TSR) in 2015/2016 was a negative 12.2%.

Its Board declared a final dividend of Rs.1.50 per share to be paid on 13June. The first and second interim dividends for the year were Rs.4.50 per share and Rs.1.00 per share respectively. The first interim dividend included a special dividend of Rs.3.50 per share on account of the cash inflow of Rs.4.14 billion to the company from the share repurchase made by Union Assurance PLC.

Accordingly, the total pay-out in the year under review was Rs.8.04 billion compared to Rs.3.48 billion in the previous financial year.
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Aitken Spence FY16 pre-tax profit down 33% to Rs. 3.8 b

• Challenging year sees bottom line dip 43% to Rs. 2 b; Group revenue down 25% to Rs. 26 b
• Optimistic on future, invests Rs. 12.8 b in new ventures and capital assets

Aitken Spence Plc yesterday reported lower performance in FY2016 owing to challenging times in comparison to a year earlier.

Group revenue was down by 25% to Rs. 26 billion whilst pre-tax profit was lower by 33% to Rs. 3.8 billion. Net profit attributable to equity holders was down 43% to Rs. 2 billion.

“The past year has been a challenging one for the group, attributable to a number of factors including the cessation of the power agreement with the CEB, a slowdown in the national economy, disappointing performance in the Maldivian hotel sector and foreign exchange losses in a number of overseas investments,” Aitken Spence Chairman D.H.S. Jayawardena was quoted as saying in a company statement.

“However, we have proactively positioned ourselves for exponential growth in the medium and long term through strategic investments,” he added.

The statement said the conglomerate followed through on its strategy of investing in the medium and long term future amidst a challenging operational climate, by investing Rs. 10 billion on new ventures both local and overseas and a further Rs. 2.8 billion on property, plant and equipment.

The tourism sector recorded a growth of 1.9% in revenue to Rs. 17.2 b, while the Maritime and Logistics, and Services sectors reported revenues of Rs. 8 b and Rs. 1.1 b respectively, which grew by 6.9% and 5.5% respectively over the year. The Strategic Investments sector revenue dropped mainly due to the cessation of the power purchase agreement of the 100MW thermal power plant at Embilipitiya.

Aitken Spence PLC reported a profit attributable to shareholders of Rs. 2.03 b while earnings per share stood at Rs. 4.99.

The focus on meeting the tourism boom in the country has marked a theme for the year’s operations. The Group unveiled its newest hospitality offering – Heritance Negombo, an iconic 139-room property in the heart of the coastal city. Furthermore, the Sands Kalutara, was refurbished and rebranded as Turyaa Kalutara with an expansion of 90 rooms while the existing 110 rooms were upgraded and refurbished in order to command a strong position in the 4-Star plus segment.

Aitken Spence Hotels also became the first Sri Lankan hotel company to purchase a hotel in the Middle East with its acquisition of Al Falaj, the popular four-star hotel in Oman’s capital, Muscat.

During the previous financial year and the beginning of this financial year the Group invested on two new islands – Aarah and Raafushi. Construction has begun on a 150-roomed five star property on Aarah, which is due for launch in winter 2017, while plans are being finalised for a resort on Raafushi. The acquisitions will further strengthen the Group’s presence in the Maldives, where Aitken Spence is presently the largest international hotel operator with four renowned properties.

Aitken Spence Travels followed suit achieving a landmark 129,000 arrivals, the highest inbound volume handled by a single operator, an optimistic upturn for the group’s future focus on the sector and ‘Destination Sri Lanka’ at large.

“We are approaching a momentous milestone of completing 150 years in business since the formalised beginnings of the group. We have succeeded in staying relevant and agile throughout the decades, while transforming ourselves to meet the challenges of the macro environment. Throughout our entrepreneurial journey, our priority has been to maintain sustainability and responsibility in all of our practices. In light of the challenging operating environment we are experiencing at present, we have adopted a lean management style and made key investments for the medium and long term future. I’m optimistic about the future that we invest continuously in,” said Aitken Spence Deputy Chairman and Managing Director J.M.S. Brito

Aitken Spence invested approximately $ 16 million to acquire a 20% equity stake in Fiji Ports Corporation Limited, the regulator of the ports sector in Fiji and the owner of the infrastructure of all major ports in Fiji.

Listed in the Colombo Stock Exchange since 1983, Aitken Spence is a blue chip conglomerate with a strong regional presence in the Hotels, Travels, Maritime Services, Logistic Solutions, Plantations, Power Generation, Financial Outsourcing, Insurance, IT, Printing and Apparel sectors.
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