Sri Lanka Watawala December quarter profit up marginally

Jan 31, 2011 (LBO) - Sri Lanka Watawala Plantations December 2010 quarter profit rose three percent to 189 million rupees from a year ago with group sales stagnant at 1.7 billion rupees, a stock exchange filing said.

Earnings per share for the company, a unit of India's Tata Tea group, were 0.80 rupees compared with 7.71 rupees the previous year, before a one into ten share split in September 2010.

Watawala group's nine months profit rose 82 percent to 418 million rupees on high prices for tea and rubber with an eight percent rise in sales to 4.5 billion rupees.

"The performance of tea was encouraging which bettered the performance of the previous period by improving on the bottom line by 44 percent," managing director Vish Govindasamy said in a note accompanying the results.

"Increased production coupled with better agricultural practices and better prices in comparison with the market elevation averages were the main contributory factors."

Govindasamy said "exceptionally high" rubber prices have significantly increased the profitability of the group's rubber business, which contributed 80 million rupees profit compared to a loss of 7.5 million in the same period the previous year.

"The average prices during the nine months improved by 80 percent," he said.

"The company will be in a position to capitalize on this situation and report a better performance in the next quarter subject to good weather conditions."

Watawala group's oil palm business made a profit of 168 million rupees, marginally lower than the previous period as production fell owing to unfavourable weather conditions.

" . . . but with improving prices due to global supply shortages, profitability was maintained," Govindasamy said, warning however that this trend would ease towards the end of the financial year.

The company continues to benefit from its partnership with Tata Global Beverages (formerly Tata Tea) with increasing support for exports of bulk and value added tea to Tata and their clients, he said.

Exports of the company to Australia are now handled by Watawala Marketing, a fully owned subsidiary which was formerly the group's fast moving consumer goods division.

The company has had a "remarkable" nine months ended December 2010, with a net profit of 157 million rupees, up 43 percent from the previous period, Govindasamy said.

"Overall, your company has performed much better than the previous period and it is expected that this trend would continue till the end of the financial year," he told shareholders.

Govindasamy said he will reveal the firm's future plans when it announces final results on completion of the financial year.

source - www.lbo.lk

Sri Lanka Sunshine group expands into tourism, hydro power

Jan 31, 2011 (LBO) - Sri Lanka's Sunshine Holdings group has expanded into tourism and energy, converting tea estate bungalows into boutique hotels and making use of hill-country water ways to generate power, a statement said.

The group said in a stock exchange filing December 2010 quarter net profit fell 16 percent to 93 million rupees while sales rose seven percent to 2.9 billion rupees from a year ago.

"The company’s has moved into the leisure sector with the setting up of two “Mandira” boutique bungalows in the upcountry with more to follow in the months ahead," Sunshine group chairman Rienzie Wijetilleke told shareholders.

"Increased tourist arrivals as well as effective marketing have led to higher than anticipated occupancy during the period," he said in a note accompanying the quarterly results.

"We forecast this sector to grow into a sizeable business in the group as we expand across the country and overall improvement in tourist arrivals."

Wijetilleke also said the company’s hydropower subsidiary Sunshine Energy is scheduled to complete building its first plant, a 1.7 megawatt unit in Waltrim estate, Lindula, in the central hills, by December 2011.

"Two other projects have been finalized and work will begin soon, ensuring we achieve our target of 10 megawatts by 2013," Wijetilleke said.

The Sunshine group has interests in plantations, fast moving consumer goods, healthcare, packaging, travel and leisure and hydropower.

Net profit in the nine months to December 2010 rose six percent to 266 million rupes from the previous year with sales up 13 percent to 7.8 billion rupees.

Wijetilleke said sales and profits were driven mainly by the group's two major businesses, plantations and healthcare.

The plantations business gross profits rose 49 percent backed by record rubber prices and the healthcare sector improved sales of higher margin diagnostics and surgical segment sales.

The group's overheads increased by 14.6 percent in the nine-month period mainly because of personnel cost increases in the plantations sector.

Lower interest rates and better cash management across group companies led to a 24 percent reduction in finance costs.

source - www.lbo.lk

Sri Lanka PMB and finance firm to be separate

Jan 31, 2011 (LBO) - Sri Lanka's People's Merchant Bank will not take over the assets and liabilities of a finance company whose shares it has acquired but will keep it separate and list in the stock market.

PMB, a listed company said in a stock exchange filing that the decision was taken following instructions received from the Central Bank.

PMB owns 99.9 percent of the stock of People's Merchant Finance, formerly known as Silvereen Finance.

PMB said earlier that it wanted to take-over the firm along with its finance company license allowing the merged firm to raise deposits and lower its funding costs, provided regulatory approval was given.

Finance companies are regulated by the Central Bank.

source - www.lbo.lk

Sri Lankan stock website shuts after SEC warning

A Sri Lanka stock investment website has closed after warnings against misleading investors by the capital markets regulator, whose officials said they were cracking down on such sites.

An official at the Securities and Exchange Commission (SEC) said they warned the people operating the website, saying misleading advice that influence share prices could violate SEC regulations.

The operator of the site, investnow.lk, decided to close last week after the warning by the regulator.

A notice posted on the website said it was "temporarily suspending" the forum in order to "rework" its strategy and create a "professional entity that will continue to help investors navigate the great depths of the market and act to be a credible guide with the help of you all, the community."

It said it would act in a manner that "best serves the community . . . and be free from manipulative control through education and creating awareness."

The site offered to refund members for any services paid for that are still valid.

The SEC official said they were also monitoring other websites that offer advice on investing in the stock market which has been on a bull run since the island’s 30-year ethnic war ended in 2009.

The SEC was also investigating stock brokers believed to be behind some of the websites that offer advice to investors, he said.

The Colombo bourse was Asia’s second-best performing market last year.

source - www.island.lk

Sri Lanka shares end down 0.2-pct

Jan 31, 2011(LBO) - Sri Lankan stocks closed down Monday dragged lower by index heavy stocks and some stocks in the banking sector, brokers said.

The All Share Price Index closed at 7,174.87, down 0.24 percent (17.62 points) while the Milanka Price Index of more liquid stocks closed at 7,134.27, down 0.43 percent (31.05 points) according to stock exchange provisional figures.

Turnover was 3.1 billion rupees.

Thakshila Hulangamuwa of Asha Phillips Securities said retail investors were dominant in the day's trading.

Commercial Bank closed at 278.00, up 1.50 rupees and Sampath Bank closed at 295.40, down 4.90 rupees.

John Keells Holdings closed at 293.60, up 0.50 cents and Dialog Axaita closed flat at 11.60 rupees.

Sunshine Holdings closed at 50.30, up 1.70 rupees.

The group said it was expanding into tourism and energy, converting tea estate bungalows into boutique hotels and making use of hill-country water ways to generate power.

The group also said December 2010 quarter net profit fell 16 percent to 93 million rupees while sales rose seven percent to 2.9 billion rupees from a year ago.

There were two crossings of Royal Ceramic shares at 160.00 and the stock closed at 160.20, down 2.70 rupees.

Watawala Plantations closed at 30.10, down 1.60 rupees. The company's December 2010 quarter profit rose three percent to 189 million rupees from a year ago with group sales stagnant at 1.7 billion rupees, a stock exchange filing said.

source - www.lbo.lk

Sri Lanka Inflation Slows in January for Second Straight Month

By Anusha Ondaatjie

Jan. 31 (Bloomberg) -- Sri Lanka’s inflation slowed for a second straight month, supporting the central bank’s decision to cut borrowing costs this month and spur economic growth.

Consumer prices in the capital, Colombo, rose 6.8 percent in January from a year earlier after gaining 6.9 percent in December, the statistics office said on its website today. The median estimate of five economists in a Bloomberg News survey was for a gain of 7 percent.

Governor Ajith Nivard Cabraal this month cut a key interest rate for the third time since July, contrasting with counterparts from India to Thailand who tightened monetary policy. The floods in Sri Lanka’s northeast won’t prompt a change in rates, Cabraal said Jan. 18, pointing to adequate rice stocks that can check any spurt in food prices.

“With growth being the priority, the central bank will take every opportunity to keep borrowing costs low,” Sanjeewa Fernando, an analyst at CT Smith Stockbrokers Pvt. in Colombo, said before the report.

To keep prices under control, Sri Lanka this month almost halved import taxes on milk powder to 28 rupees a kilogram. The government also slashed customs duty on gasoline by 67 percent to five rupees (4 cents) a liter.

“The government’s measures will keep a check on inflationary pressures,” CT Smith’s Fernando said.

Sri Lanka is aiming to accelerate growth to 8.5 percent in 2011 and 9 percent in 2012 from an estimated 8 percent expansion in 2010, Cabraal said Jan. 4.

India on Jan. 26 boosted rates for the seventh time in a year to rein in inflation. Thailand on Jan. 12 increased its benchmark rate for the fourth time in seven months.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

source - noir.bloomberg.com

Nahil commences to build up 'land bank' along Southern coast

Following its recent disclosure to the Colombo Stock Exchange which said the company would seek to expedite on post war leisure sector opportunities in the country, business magnate Nahil Wijesuriya controlled East West Properties (PLC) has started its hunt to find suitable properties in order to create a 'land bank' for hotel projects along the Southern coast of Sri Lanka.

In a weekly newspaper the company last week advertised for 1 to 3 acre beach front properties in the coast line from Colombo to Hambantota.

East West Properties recently informed the Colombo bourse that its board of directors has resorted to go for Rs.1.03 billion rights issue to 'raise funds to invest in the booming tourism industry and for working capital for ongoing projects'.

The company also said that it wanted to build up a 'land bank' of properties suited for the hospitality and leisure industry.

Releasing its interim results for the nine months ended December 2010 yesterday, the company said its net profit rose 841 percent to Rs.4.3 million for the December quarter from the corresponding period of last year.

The net profit for the nine months ended December 2010 also rose 630 percent to Rs.36 million in comparison with the Rs.4.9 million recorded in the same period, previous year.

The company's property, plants and equipments were valued at Rs.138 million while total assets as at December 2010 were Rs.500 million. The stated capital of the company was Rs.175 million.

The company has two warehouses in Peliyagoda which have been rented out.

Nahil Wijayasuriya controlled Asia 2000 Investments Incorporation remains the controlling shareholder of the East West Properties owning 51 percent stake.

Last year Wijayasuriya completely exited from the Hotel Services PLC (the owners of the Ceylon Continental Hotel) selling his controlling stake in the prime property to Hayleys Group, controlled by Dhammika Perera.

source - www.dailymirror.lk

Softlogic IPO in March

Sanjeevi Jayasuriya

The banking sector in Sri Lanka needs to consolidate to support the rapid economic development in the country, Softlogic Holdings Chairman and Managing Director Ashok Pathirage told Daily News Business.

“The country has a high number of small banks and they are unable to provide massive development loans. The banks need to consolidate to support growth and the development process of the country,” he said.

“The corporate sector needs to undertake projects and support the country’s socio economic development. It is important that top banks merge to provide these funding facilities within the country,” Pathirage said.

“We could manage with three to four solid banks considering the country’s size and population. The banking industry has the necessary regulatory framework to move forward. However, merges within the industry will facilitate the huge capital requirement to carry out the development projects,” he said.

The Softlogic Finance company will focus on high performance in keeping with its brand name and reputation. It has a strategic plan in place to achieve Rs 500 million profitability within the next three years.

“This is the level that we are planning to reach in the next few years. We will expand our branch network to widen the reach and will also introduce more finance products to increase our customer base,” Pathirage said.

Softlogic Holdings will go for an IPO in March to raise funds to further build the company.

source - www.dailynews.lk

Fitch credit rating highlights in December 2010

Fitch affirmed Central Finance Company PLC’s (CF) National Long-term rating at ‘A+(lka)’ on December 10, 2010. The agency has also assigned an ‘A(lka)’ rating to CF’s proposed subordinated debt issue of Rs 500m with a tenor of five years.

The Outlook is Stable. CF’s ratings factor in its relatively good financial profile in the Registered Finance Company sector in Sri Lank and CF’s lack of product and funding diversity in relation to banks (an inherent limitation of the RFC business model).

On December 10, 2010 Fitch affirmed Senkadagala Finance Company Limited’s (SFC) National Long-term rating at ‘BBB+(lka)’. The Outlook is Stable. SFC’s rating reflects its long operating history and good capital structure, as well as its relatively good credit control systems and processes.

On December 15, 2010 Fitch downgraded Hayleys MGT Knitting Mills PLC’s (HMGT) National Long-term rating to ‘BBB(lka)’ from ‘BBB+(lka)’, and placed the Outlook on Negative.

The downgrade was driven by HMGT’s lower operating margins and the company’s inability to increase sales prices in the face of significantly increased cotton prices.

Fitch also noted that HMGT’s operations management could require strengthening due to lapses in the debtor and inventory management areas. HMGT’s rating could deteriorate further if margins and performance do not improve in the near-term.

On December 15, 2010 Fitch affirmed Trade Finance and Investments Ltd’s (TFI) National Long-term rating at ‘BB+(lka)’. The Outlook is Stable. TFI’s rating factors in its high capitalization in terms of its size of operations and good profitability. The rating is constrained by TFI’s small asset base, limited product diversity, and narrow funding base.

On December 15, 2010 Fitch affirmed Union Bank of Colombo Ltd’s (UB) National Long-term rating at ‘BB+(lka)’ and revised the Outlook to Stable from Positive.

UB’s rating reflects its moderate asset quality and lack of a broad deposit base. The rating also takes into account the challenges to the scalability of its operations and the impact to profitability given its holding of a low-yielding deep-discount bond.

The outlook was revised to Stable from Positive, in consideration of further time required by UB to implement the changes required in existing systems to manage challenges of scalability of operations in light of projected loan growth and branch expansion.

On December 15, 2010 Fitch upgraded the National Long-term rating of Singer (Sri Lanka) PLC’s (Singer) senior unsecured notes to ‘A(lka)’ from ‘A-(lka)’.

The rating Outlook is Stable. The upgrade of SSP’s rating was driven by its improved liquidity and credit metrics, as well as its improved competitive position and revenue potential emanating from revised tariff structures and opening of new geographical areas in the current post-war environment. Fitch upgraded Singer Finance (Lanka) Limited’s (SFL) National Long-term rating to ‘BBB+(lka)’ from ‘BBB(lka)’ on December 16, 2010.

The Outlook is Stable. The upgrade followed the upgrade of its parent- Singer Sri Lanka PLC (SSP)’s - National Long-term rating to ‘A(lka)’/Stable from ‘A-(lka)’/Stable, and reflects the increased level of support assumed to be available from SSP and the perceived strategic importance of SFL to its parent.

On December 29, 2010 Fitch affirmed the Housing Development Finance Corporation Bank of Sri Lanka’s (HDFC) National Long-term rating at ‘BBB+(lka)’. The outlook is stable. At the same time, the agency has affirmed the ‘BBB+(lka)’ rating on the bank’s outstanding Rs 195m senior unsecured redeemable debentures.

HDFC’s ratings reflect its demonstrated ability to contain interest rate risk to an extent by re-pricing existing loans, despite the sizeable maturity mismatches between its assets and liabilities.

The ratings also factor in the State’s 51 percent ownership of the bank, as well as HDFC’s perceived importance to low- and middle-income housing, sizeable funds derived from the State and related entities, low ultimate credit risk of its housing loans, and inherent limitations in its current business model.

source - www.dailynews.lk

Sri Lanka poultry producers cry foul Hatchlings killed as domestic traders cannot compete with Indian imports

By Lal Gunesekera

Eight to 10 percent of the poultry industry are hesitant from purchasing day-old chicks from the hatcheries who complain of an excess of chicks and have even started destroying them or culling the senior batches.

The President of the Poultry Producers Association Dr. D. D. Wanasinghe told The Island Financial Review that most of the small scale farmers are in dire straits due to the import of chicken from India and are temporarily moving out of the market as they do not possess sufficient freezers to stock their chicken, and for this reason the price of a kilo of chicken in Ja-Ela, Kandana and Wattala areas have dropped to between Rs. 300 to Rs. 310. He said that the big time producers stock their chicken in freezers, which could be stored for about two months.

Dr. Wanasinghe said that there was plenty of locally produced chicken in the market at the controlled price of Rs. 350 (skinless) and there is about an estimated 200,000 kg in stock at the moment. He said that production has also shown a marginal increase in production and that there was absolutely no necessity for any imports of chicken from India.

He said that the Indian chicken was ‘not moving’ at Lanka Sathosa outlets as they are heavier in weight (more than 1 ½ kg) than the local chicken which weighs about 1 kg 200 grams with consumers preferring to purchase the local chicken.

Dr. Wanasinghe also said that a kilo of chicken in India is Rs. 47 (Rs. 110 Sri Lankan), while an egg costs Rs. 2.86 (Rs. 7 Sri Lankan). India employs three million persons in the industry and produces 2.3 million tons of chicken annually, while 118,000 tons are produced in Sri Lanka each year.

Where the Indian eggs were concerned, Dr. Wanasinghe said that they were small in size and weighs about 50 grams though sold at Rs. 12, while the eggs produced in Sri Lanka weighs more than 55 grams though costing anything between Rs. 15 to Rs. 17 with the consumer getting more nutritional value.

A major egg distributor who wished to remain anonymous said that the imports of eggs and chicken were paralyzing the local poultry industry. He too commented that prices of these two commodities always increased during December for Christmas and again in April for the Sinhala and Hindu New Year and also during the Ramazan festival.

He told The Island Financial Review that millions are involved in the industry and felt let down by the government, who should encourage and not discourage the local poultry industry. He blamed the import of 150,000 day old chicks from England and sold at Rs. 210 per chick. He said: When it was in demand it was sold for Rs. 70, but now increased to Rs. 210.

He said that there was even a ban on Indian poultry products by Oman, Bhutan, Saudi Arabia and Qatar due to avian flue two years ago, but lifted now. This was mostly in the eastern part of India who are now setting their sights on Sri Lanka with egg prices escalating.

source - www.island.lk