CORPORATE

Strong Q1 profit, revenue growth at Hayleys

Hayleys Group has reported strong growth in turnover and profit in the first quarter of the year, traditionally its slowest period.

Pre-tax profit for the three months ending June 30 grew 42 per cent to Rs. 520.8 million on the back of improved performances from most sectors and consolidation in others, the Blue chip conglomerate said in a filing with the Colombo Stock Exchange. Profit after tax for the period grew 50 per cent to Rs 340.4 million on a turnover of Rs. 11.7 billion, which was up 58 per cent over the corresponding three months of last year. Profit attributable to equity holders of the company improved by 20 per cent to Rs. 150.7 million.

Hayleys Chairman Mohan Pandithage said the improved performance of the plantations, purification, agriculture and transport sectors primarily contributed to the Q1 performance.

Plantations, which suffered an operational loss of Rs. 36.6 million in the first quarter of last year, recorded an operational profit of Rs. 234.1 million in the period reviewed. Turnover improved by 263 per cent to Rs. 1.4 billion largely due to the consolidation of Talawakelle Tea Estates in the quarter reviewed.

Purification Products contributed Rs 204 million to operational profit and Rs. 1.4 billion to turnover.

Agriculture, excluding plantations improved its contribution to operational profit to Rs. 144.6 million, led by Agri Inputs which posted a gain of 23.8 per cent. Transportation achieved a significant 179 per cent growth in operational profit, from Rs. 37 million in the first quarter of last year to Rs. 103.3 million in the quarter under review.

In addition, noteworthy contributions to turnover also came from Hand Protection with Rs. 2.5 billion, Agriculture with Rs. 1.7 billion (excluding plantations), and Textiles, accounted for as a subsidiary business from July 2009 onwards, with Rs. 1.6 billion.

The Group’s Earnings per Share increased from Rs. 1.67 for the corresponding quarter of 2009-10 to Rs. 2.01 for the reviewed quarter, an improvement of 20.2 per cent.

Established in 1878 and rated a Business-to-Business (B2B) Superbrand among Sri Lanka’s diversified conglomerates; the Hayleys Group employs more than 30,000 people, and accounts for 2.45 per cent of Sri Lanka’s export income.

Piramal Glass posts Rs. 53.2 m net profit

Piramal Glass Ceylon PLC (PGC), manufacturer of glass containers for all segments of glass packaging has reported continued growth in first quarter of FY2011 by recording a jump in its net profit to Rs. 53.2 million compared to a loss of Rs. 118.7 million for the same period last year.

Gross profits for Q1 FY 2011 increased by 30 percent to Rs. 227.5 million over Rs. 175.6 million in Q1 FY 2010. Gross profit margin in Q1 FY 2011 has increased to 26 percent from 22 percent in corresponding period last year.

CEO and Executive Director Sanjay Tiwari said “Net Sales for the quarter ended June 30 grew by 8.6 percent to Rs. 868.2 million over Rs. 799.8 million in Q1 FY 2010. Gross profits were up by 30 percent to Rs. 227.5 million, while the net profit for the period was Rs. 53.2 million as compared to a loss of Rs. 118.7 million for the same period the previous year”.

The company was happy to notice the continuous growth of the domestic market. The domestic market grew by 30 percent to Rs. 621 million as against Rs. 476 million in the previous year. The post-war peaceful environment together with the opening up of the North and East now seems to have paid dividends with all segments of bottle sales showing an upward trend. The company continues to focus and build its position in the export market.

The export volumes comprised almost 34 percent of its total sales volume during this quarter.

The manufacturing process has stabilised and is yielding better efficiencies. The company now performs with a capacity utilisation of over 90 percent. The productivity indicators have also vastly improved over the last year which has contributed to 18 percent more glass tonnage being produced when compared to the same period in the previous year.

A distinct reduction has been achieved in the interest cost. The interest cost was down by 55 percent to Rs. 86 million as against Rs. 194 million during the corresponding period of the previous year.

This reduction was due to the restructuring of part of the long term loan to a foreign currency loan, as well as the general decrease of the interest rates.

The company is confident about its future with order books filled with growing domestic demand as well as established exports.

The 21 acre extent of land at Ratmalana where the factory was earlier situated is an investment property to be unlocked in value terms. With the land markets regaining strength the management is confident of unlocking its value and settling part of the long-term loan which will further reduce interest costs.

Watawala Plantations forges ahead with significant growth

Watawala Plantations PLC recorded impressive growth during the first quarter of 2010, posting a profit after tax of Rs. 120 million. The profit after tax recorded in the previous quarter was Rs. 39 million. The Company marked a significant improvement in turnover of its key products including tea, rubber and palm oil.

The Group’s profits grew to Rs. 146 million from Rs. 36.8 million recorded in the previous quarter.

A profit of Rs. 72 million was achieved with the transfer of the Net Assets of the Fast Moving Consumer Goods Sector (FMCG). The profits earned by the FMCG sector, which is not included in the profits earned by the Company, forms a part of the profits of the Group.

The activities of the FMCG sector come under the purview of Watawala Marketing Ltd, a fully owned subsidiary of Watawala Plantations.

Tea production as well as turnover recorded a growth of 16 percent and 30 percent respectively, over the figures of the same quarter of the previous year. While the Net Sales Average (NSA) rose by 9 percent, the quantity of own-crop increased by 0.11 million kilograms.

In keeping with its policy of protecting the environment, the Company adopted prudent measures aimed at promoting field and product development through sound agricultural practices and catering to the needs of consumers.

This policy continued to pay dividends, as tea prices remained reasonably attractive at the Colombo Auctions.

Turnover of rubber also grew by an impressive 192 percent with rubber prices improving by 129 percent during the period under review.

Palm oil recorded an increase in profits as the Company continued to develop this crop as a part of its business strategy.

The profits continued to grow as a result of the enhanced attention paid to the local market, which enjoyed buyer-preference when compared to Indian exports. The Company also introduced its very own bottled product of refined palm oil, under the brand name, ‘Oliate’.

Exports during the period consisted of bulk tea to Tetley of UK and the export of value-added tea to Australia. The marketing of value-added tea is handled by the Company’s fully owned subsidiary Watawala Marketing Ltd.

The decline in export-profit is attributable to the absence of palm oil exports during the current period. The Company’s association with Tata Tea proved significant with new buyers being introduced through its worldwide brand preference.

Watawala Marketing Ltd. also posted a turnover of Rs. 313 million, representing a 14 percent growth compared with the same quarter of the previous year.

This favourable outcome was due to the fact that its main brands ‘Zesta’ and ‘Watawala Kahata’ continued to expand their market share.

Watawala Plantations aims to improve on the value additions and high productivity of the first quarter of 2010, with emphasis on accelerating its growth momentum and improving profitability.

Sunshine brightens in Q1

Strong performances by companies in plantations and healthcare in the first quarter of 2010-11 have generated impressive revenue and profit growth for Sunshine Holdings PLC, the diversified group comprising Watawala Plantations, Swiss Biogenics and companies in packaging, travel and power generation.

The group achieved revenue of Rs. 2.5 billion for the three months ending June 30, a 25 percent growth over the corresponding quarter of last year, with Plantations recording Rs 1.44 billion and healthcare Rs 992.6 million, reflecting growths of 27 percent and 17 percent respectively.

Group profit before tax at Rs.287.2 million was an increase of 92 percent in the quarter reviewed, while profit attributable to the shareholders of Sunshine Holdings PLC, increased by a noteworthy 52 percent to Rs 116.3 million, the company said in a filing with the Colombo Stock Exchange.

Bottom line growth was driven by Healthcare, which improved its profit before tax by 32 percent and its post-tax profit by 31 percent, and Plantations whose pre-tax profit was up 280 percent and post-tax profit up 296 percent.

An exceptional income of Rs 72 million was realized by the Plantation sector in the quarter under review due to the separation of its FMCG business into a fully owned subsidiary, the company said.

Speaking on this performance, Sunshine Holdings Chairman Rienzie T. Wijetilleke said “The Group performed impressively during the quarter under review. In the Healthcare sector, our presence in all major sub sectors namely, Pharmaceuticals, Surgical and Medical Devices, Diagnostics and Nutraceuticals, enabled us to hold the market share overall. Significant growth was achieved through gross margin improvement, tight cost controls and effective management of working capital.”

He said the performance of the Plantation sector was driven by higher tea production which increased by 16 percent over that of the corresponding quarter and better prices.

“Palm Oil and the FMCG business in this sector have also contributed to both top and bottom line growth and we foresee further improvements into the latter part of the year,” Wijetilleke said.

The Group’s Packaging sector also posted good growth with turnover increasing by 161 percent to Rs 58.7 million.

The growth in revenue and lower finance costs contributed to the sector’s profitability, and timely investment in equipment that has served to reduce energy costs and increase throughput should further improve returns in the quarters ahead, Wijetilleke said.

He disclosed that “Overall, the Group anticipates a sustained increase in business volumes across all key sectors and expects sharp comparative earnings from the Plantation and Health sectors over the next nine months.”

A group focused on expansion locally and internationally, Sunshine Holdings comprises Watawala Plantations, Swiss Biogenics, Sunshine Packaging, Sunshine Travels and Watawala Marketing. The Group is associated with Tata Tea Ltd, and its subsidiary the Tetley Group. Sunshine Holdings also owns tea brands Zesta and Watawala Kahata, which are marketed locally and in global markets by Watawala Plantations.

Union Assurance reports positive results in six months

Union Assurance reported positive results in both turnover and profits for the six months ended June 30.

General and life insurance premiums increased by 5 percent from Rs. 3 billion to 3.1 billion compared to the same period of the previous year.

This was mainly due to the increase in life insurance premiums which grew by 18 percent from Rs. 1.3 billion in 2009 to 1.5 billion in 2010. General insurance premiums recorded a 5 percent decline compared to last year.

Profit before tax increased by 31 percent from Rs.114 million as at June 2009 to Rs.149 million as at June 2010. Profit after tax also increased by 13 percent from Rs.92 million in June 2009 to Rs.104 million in June 2010.

HNB Assurance records 31 percent PAT

HNB Assurance PLC has reported a 31 percent growth in its profit after tax for the half year ending June 30 according to interim results released to the Colombo Stock Exchange last week.

Accordingly, profit after tax for the six months registered Rs. 44.3 million while profit before tax stood at Rs.62.3 million, up by 34 percent.

The Company’s turnover from General Insurance grew by 10 percent to record Rs. 604.4 million while the turnover from Life Insurance grew by 3 percent to reach Rs. 459.8 million for the first half of the year.

The Company which generated a significant volume of single premium life business during the corresponding period last year could not do the same in the current year due to the prevailing low interest rate environment.

This was the primary contributor to the relatively low growth experienced from the life business.

The growth rate of 10 percent achieved from General Insurance was in excess of the industry average.

It is a commendable achievement considering the non-renewal of a significant volume of terrorism covers and the sharp reduction in the rate applied for such covers.

Another noteworthy aspect of the Company’s performance during the period under review has been its ability to achieve a 6 percent growth in the income from investments in spite of the falling interest rates.

The significant proportion of high yielding investments made when interest rates were much higher along with capital gains realized from equity trading were the main contributory factors.

Managing Director, Manjula de Silva said, “HNB Assurance PLC has done very well during a period of rapid adjustment to changing macroeconomic variables.

The Company is pleased with the excellent growth achieved in profits during such a challenging period and will take effective steps to accelerate the rate of growth in the turnover.”

SMB records Rs 27.6m PAT in six months

The SMB Leasing PLC Group (SMB) formerly known as Seylan Merchant Bank Group has reported profit after tax of Rs. 27.6 million against gross income of Rs. 76.7 million for the six months ending June 30 continuing the trend of profitability established in the concluded financial year.

The Group achieved significant growth in net interest income, converting a loss of Rs. 71.5 million for the first half of 2009 to a gain of Rs. 23 million in the period reviewed, reversing interest in suspense by focusing on debt recovery.

As a result, interest expenses fell sharply, from Rs. 161.7 million a year ago to Rs. 35.5 million for the first half of 2010.

The SMB Group also reduced loan loss provisions and wrote back Rs. 12.6 million from write offs and provisions of Rs. 59.2 million, according to figures filed with the Colombo Stock Exchange. “Our performance in the review period, and particularly in the second quarter, reflects the success of efforts to improve fundamentals and clear liabilities,” SMB’s Executive Director/Chief Executive Officer Surath Peiris said.

The SMB share is currently trading on the Colombo Stock Exchange at around Rs. 1.80, and the company’s earnings per share is at 10 cents, giving the stock a price earning of 18 times.

For the year ending December 31 SMB Group posted a net profit of Rs. 82.2 million on gross income of Rs. 623.1 million.

The 2009 results were boosted by the sale of an 81 per cent stake in Seylan Merchant Leasing PLC to People’s Leasing Company for Rs. 445 million and other disposals, enabling SMB to settle its maturing liabilities. Simultaneously, the company’s debt recovery initiatives resulted in the collection of Rs. 82 million out of a provision of Rs. 338 million made in the previous year for bad and doubtful debts.

CDB to be listed next month

Citizens Development Business Finance Ltd (CDB) announced its pre-tax profit of Rs. 40.5m for the first quarter of 2010, a growth of Rs. 27.7m or 217 percent over the corresponding period last year.

The post-tax profit of CDB for the first quarter ended June 30 amounted to Rs. 34.5m, a growth of Rs. 24.7m or 253 percent.

CDB’s Chief Executive Officer Mahesh Nanayakkara said that this remarkable performance was achieved through growth in total assets, revenue and improved margins. “Our total asset base grew by 6.7 percent to reach Rs. 7.1b reflecting an increase of Rs. 449m since March 31, while revenue reached Rs. 416m reflecting a growth of 14 percent over the corresponding period. The net interest income grew by 38.4 percent to Rs. 162 m an increase of Rs. 44.9 m over the corresponding period. The total deposit base stood at Rs. 5,369 m, while the overall NPL ratio stood at 6.70 percent at June 30.

The earnings per share recorded a figure of Rs. 0.87 for the quarter”, he added.

CDB’s current countrywide reach stands at 32 outlets, including two Service centres in the northern region.

It is also in the process of introducing new services such as pawning, foreign currency encashment (authorised money dealership), money remittance, Islamic financing, and savings accounts. CDB recently signed up to provide foreign money remittance services through ‘Money Gram’. This will help CDB synergies the services it offers to its existing customers and further strengthen the varied financial services provided to the public.

CDB intends to continue this momentum throughout the period strengthening its financial position in the industry.

CDB has made remarkable progress in the northern region through its newly opened outlets in Jaffna, Vavuniya and Palaly.

The extension of credit to the SME sector through these branches has recorded figures exceeding expectations.

“We have submitted a listing application to the Colombo Stock Exchange and expect to be listed by September.

By being a listed institution on the CSE, we intend to achieve multiple objectives of complying with regulatory requirements ahead of stipulated deadlines, broadening shareholder structure, strengthening capital raising ability to support future growth strategy and increasing transparency”, Nanayakkara added.

Appointments

Director, Sampath Bank

Sampath Bank PLC has appointed Deepal Sooriyaarachchi as a Director of the Bank. Sooriyaarachchi is a Master of Business Administration from the Sri Jayawardenapura University and a Fellow Member of the Chartered Institute of Marketing U.K. He held the positions of Chief Executive Officer of Eagle Insurance Company Limited, Sri Lanka, presently known as AVIVANDB Insurance PLC,

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Independent Director, Ceylinco Insurance

Ceylinco Life PLC has appointed former diplomat and retired General Srilal Weerasooriya as an independent non-executive director.

NDBIB raises over Rs. 8b during first half 2010

NDB Investment Bank (NDBIB) spearheaded its operations in the capital market by raising over Rs. 8b during the first half of 2010. NDBIB’s Debt Unit achieved this landmark performance by raising funds through a diversified range of debt instruments. NDBIB raised over Rs. 4b via Securitisations whilst the remaining funds were raised through a mix of Debentures, Structured Loans and Commercial Papers. Amongst these were the fund raising of over Rs. 2b to People’s Leasing Company Limited, Rs. 1.2b to Ceylon Theatres Group, Rs 1.06b to Commercial Leasing Company Limited, Rs.1b to Singer (Sri Lanka) PLC, Rs. 850m to LB Finance PLC, and Rs. 225m to Richard Peiris Group.

NDBIB relies on its extended investor base consisting of both conventional and unconventional investors to provide cost effective funding for its clientele.

According to NDBIB, the dip in interest rates witnessed during the year paved the way for the placement of these investments.

NDBIB’s strong position in the area of Securitisations is further highlighted as they have been the structuring and placement agent for the largest Securitisation transactions to take place in Sri Lanka in a multitude of industries. According to the Trustees, the Rs. 1.055b Securitisation carried out by NDBIB for People’s Leasing Company Limited during the first half of the year is the largest ever Lease and Hire Purchase Securitisation in the country.

The Rs. 1.43b Securitisation carried out by NDBIB for the Ceylon Electricity Board is the first Utility Securitisation to take place in the country and is also the largest Securitisation the Sri Lankan capital market has witnessed.

In the Plantation Sector, NDBIB pioneered the Securitisation of Future Tea Receivable, raising over Rs. 3b worth of funds for local Regional Plantation Companies.

In addition, the Corporate Advisory Division of NDBIB too had a successful year to date having just concluded the Initial Public Offering of PC House Limited, with the issue being oversubscribed by over 4 times through 13,000 applications.

NDBIB is confident of maintaining its market leadership position in the capital market during the coming months with the expectation of the continuation of the low interest rate regime and the improved positive sentiment from both local and international investors towards Sri Lanka.

Pan Asia Bank continues growth in core banking

Pan Asia Bank announced that they had continued their growth in their core banking business resulting in a profit after tax of Rs. 150.8 m for the half year ending June 30.

This compares with Rs. 299.1 m for the same period last year, where there was bond trading and market to market gains in excess of Rs. 300 m. Profit before tax as at June 30 was Rs. 381.3 m compared to Rs. 550.5 m last year. Net interest income increased by 10.5 percent, from 647.8 m to 716.1 m, while non-funds based income decreased from Rs. 492.5 m to Rs. 190.8 m, all of the decrease being attributable to gains on fixed income securities in 2009.

While costs increased by 19.4 percent mainly due to the increased cost of running a bigger branch network and higher staff numbers and volumes of business, there was a significantly positive trend in bad debt provisions which decreased from Rs. 162.9 m last year to Rs. 15.8 m in 2010, reflecting more structured credit and recovery policies .

During the year, deposits increased by 9.5 percent from Rs. 16.3 b to Rs. 17.9 b, while net loans and advances also grew by a pleasing 22.2 percent to Rs. 13.2 b. The net Non-Performing Advances (NPA) decreased by 1 percent while the NPA ratio improved to 6.6 percent from 8.3 percent.

The trends are positive and it is expected that there will be further improvements as the year progresses.

The very successful rights issue in the second quarter ensured that the Bank has now fulfilled the regulatory requirement in respect of capital.