 |
 . |
|
|
| Hayleys Exports
marginally more profitable Changes in U.S. hop growing methods hurt coir twine exports Changes in the hop growing industry in the USA making it less dependent on coconut fibre twine imports from Sri Lanka can affect the export performance of this machine twisted product according to one of the biggest exporters here. Mr. Sunil Mendis, chairman of Hayleys Exports Ltd., has reported a decline of twine exports attributable to reduced acreage of hop fields in the U.S., the use of improved hybrid varieties and a fungus epidemic in some fields. Growing hops used in the beer industry involves providing the creeper with a climbing medium for which coir twine has been used. The new hybrid varieties need less support and also some growers have shifted to wire. "We are also concerned about exports to Korea where nets used in oyster and seaweed culture are also made of coir twine,'' Mendis said. "We are also trying to change the way that hop growers look at this question (twine vs. wire).'' Sri Lanka won a market share of coir twine exports from India. This machine twisted material is stronger than the traditional kohu lanu. Mendis also reported that defibering machines are becoming more popular with over 70 commissioned up to now. Eight of these are in the southern province where the traditional fibre extraction method of beating soaked husks with mallets is widely used. "Despite the low prices realized for bristle fibre in the last quarter following the reduced offtake of coir twine in the U.S., millers operating defibering machines continue to remain more profitable than traditional fibre millers due to lower operating costs,'' the chairman said. "It is therefore to be expected that such millers would also be encouraged to adopt mechanical defibering practices in the near term.'' He also expected that further decentralization of baling within the coconut triangle and product diversification to make a substantial contribution to the group's profitability. He was confident that the joint venture associate, BonTerra Lanka, with the experience, product exposure and knowledge gained in the first year of production, would contribute to an increased product offtake. Mendis has reported to shareholders of Hayleys Exports handling the group's traditional coir fibre business that the year ending March 31, 1998, had seen a reduction in the volume of mattress fibre shipped due to wet weather induced supply problems. This had resulted in a 22% drop in profits. At Eco Fibres Ltd., the company's fully owned subsidiary exporting value added fibre products like coir twine, geotextiles and other erosion control material, turnover had increased but thee had been a marginal profit decline. BonTerra Lanka Ltd. had commenced commercial production and exports of erosion control blankets but turnover had been inadequate to contribute to the company's profits. However, Rileys Ltd. the associate which exports cleaning devices had made a major contribution to the group's profitability. The year under review had seen group turnover down slightly to Rs. 225.3 million from the previous year's Rs. 232.4 million. The operating profit of Rs. 23.2 million compared with the previous year's Rs. 28 million. Although there was a fall in other income from Rs. 7.1 million to Rs. 4.4 million, the share of profits from associate companies of Rs. 29.6 million, up from Rs. 19.5 million a year earlier, helped to boost the pre-tax profit to Rs. 57.2 million from the previous year's Rs. 54.6 million. The after tax profit was Rs. 48 million, up from the previous year's Rs. 46.9 million. The directors have recommended a 20% final dividend on top of the interim 20% dividend already paid. The directors of the company are Messrs. Sunil Mendis (chairman), M.J.C. Amarasuriya, S. Krishnananthan, R. Yatawara, N.G. Wickremeratne, P.S.P.S. Perera. G.F. de Silva, F.R. Alles, M.N. Fernando and L.K.B. Godamunne. Plantations
boom, manufacturing resilient despite competitors'
devaluations Dipped Products Ltd. (DPL), the Hayleys - Richard Peiris associate now among the world's leading rubber glove manufacturers, had performed strongly in the year ending March 31, 1998, in the face formidable challenges thrown up by competitors in Malaysia and Thailand profiting from currency depreciations of over 50%. "The group's shown an outstanding performance for the fourth successive year,'' a company spokesman said. "We have every reason to be happy. The directors have recommended a 15% dividend on top of the 25% already paid. The total return is tax free in shareholders' hands.'' Shareholders have been told that the group pre-tax profit was up 77% to Rs. 377 million while the profit attributable to the company was up 51% to Rs. 238 million. Kelani Valley Plantations, now over 70% owned by the DPL group, was the major contributor to profit growth better than doubling its pre-tax profit to Rs. 212 million. Senior company executives noted that this was the third consecutive year in which Kelani Valley has sustained this level of profit growth. The manufacturing segment of the company had also continued to perform strongly with a 22% profit growth although margins had come under pressure with price discounts offered to hold customers in the face of cheaper prices quoted by competitors in Thailand and Malaysia. Depreciation of their currencies had sharply reduced their production costs. "Lower rubber prices helped partly offset reduced margins that resulted. We actually imported latex from Malaysia when that was cheaper than buying locally. But we had to fight to keep the market open when there was a strong lobby to prohibit such imports to prop local prices,'' the spokesman said. Dipped Products and its manufacturing subsidiaries, Grossart and Venigros, have three factories, two at Kottawa and the third at Weliweriya. Each company makes the standards products marketed by the group and also manufactures specialty products best suited for the equipment installed at location. The year under review had seen turnover growing 6% while volumes were up 10%. Stoppages for plant and process modifications saw production at two factories decline 7% but a 50% volume growth at Venigros, where production rationalisation had been completed last year, more than compensated. The group's plantation business undertaken by DPL Plantations and Kelani Valley Plantations are in to both tea and rubber with tea production rising 13% from a year earlier and rubber growing 2.5%. Turnover from the two crops were up 37% and 8% respectively. "Strong market conditions enabled an excellent performance by tea with demand from Russia and the CIS together with drought affected crop losses in Kenya and Indonesia keeping prices buoyant. Excessive rain during the peak cropping months halted tapping and hurt the rubber yield. Prices too were lower with international rubber prices falling 25%. But Kelani Valley manufactures both sole crepe and centrifuged latex which trade at a premium over sheet and this helped us,'' the executive said. Kelani Valley has begun growing passion fruit and strawberries on a pilot scale. The company has also begun a boron treated rubber wood project which had not performed up to expectation. "Management is looking at this very closely,'' the spokesman said. Hayleys carry corporate reporting prize once again Hayleys Ltd. once again topped the Best Corporate Reports and Accounts contest organised by the Institute of Chartered Accountants of Sri Lanka and Group Chairman Sunil Mendis accepted the Cyril Gardiner trophy amidst warm applause at a ceremony attended by the country's business leaders. The first runner-up was the Hatton National Bank Ltd. while Aitken Spence finished third. HNB Managing Director Rienzie. T. Wijetillake and Aitken Spence Chairman/CEO Ratna Sivaratnam accepted the awards on behalf of their companies. Hayleys have been carrying off the coveted Gardiner trophy for a number of consecutive years. All the top companies in Sri Lanka keenly compete at this contest credited for dramatically improving the standards of corporate reporting here. In a few brief remarks made after accepting the award from IMF Resident Representative Anton Op de Bek, Mendis said that he would like to suggest that the Institute pays attention to better equipping qualifying chartered accountants to fit into business career in the training and education process. The following were the sector winners: Lal Jayasundera Memorial Trophy
awarded to Group Companies Quoted above 5 subsidiaries -
Hayleys Limited Bata Shoe Company of Ceylon Ltd., which recovered last year after a thin fiscal 1996 is continuing to perform well in the current financial year with profit growth far outpacing modest turnover gains. In a provisional statement to shareholders covering the first quarter of the current financial year ending March 31, 1998, Bata has reported a slight turnover increase to Rs. 294.1 million from the previous year's Rs. 292.7 million. The trading profit, however, had better than doubled to Rs. 28.5 million from Rs. 14.1 million earned during the first quarter of the previous financial year. Provision for taxation too had doubled from Rs. 6 million to Rs. 12 million, leaving an after tax profit of Rs. 16.5 million for the first quarter, up from Rs. 8.1 million a year earlier. With brought forward profits of Rs. 182.1 million, the company had Rs. 198.6 million available for appropriation at the end of the first quarter of the current financial year. First quarter upturn at Union Carbide Union Carbide Ltd. has improved both turnover and profitability during the first quarter of the current financial year according to a provisional unaudited statement to shareholders. Turnover was up 10% to Rs. 34 million from Rs. 30.8 million a year earlier while the operating profit had grown 27% to Rs. 5.7 million from the previous year's Rs. 4.5 million. The after tax profit of Rs. 3.6 million during the quarter under review compared with Rs. 2.2 million earned a year earlier. Union Carbide had an issued share capital of Rs. 15 million. Troubled Seylan Merchant seeks fresh capital infusion The troubled Seylan Merchant Bank which recorded a Rs. 77.5 million loss in fiscal 1997 is seeking to pump Rs. 300 million new capital into its business by floating a rights issue of two new shares for every existing share. But whether the issue, which is not underwritten, will be taken up remains to be seen given that the share was trading last week at a range of Rs. 4 - 4.25. The bank said that in the event of under-subscription, it would resort to debt capital to achieve its objectives. The company which was incorporated six years ago as a subsidiary of the Seylan Bank, saw a surge of interest in its initial public offering in a year later when the Colombo Stock Market was heading for its peak. The IPO was oversubscribed tenfold. It was able to pay a 7% dividend to its shareholders in December 1994. But profitability was to decline sharply thereafter. Shareholders have been told that one of the reasons that adversely affected the business of the company was the slack performance of the stock market. "The decline in profitability has certainly not affected the morale of the employees of your bank and has geared them to take up the challenge which they have courageously and loyally taken up,'' the rights issue circular says. A new and aggressive marketing strategy has been adopted and trained personnel deployed to effectively market the products the bank offers, it said. The circular claimed 42% growth of the loan portfolio in the first half of last year and said that this was both "qualitative as well as quantitative.'' Also, the loss for Jan. 1998 had been contained to Rs. 6.3 million. The company is striking out to provincial towns considered conducive for business. The first Kurunegala branch had been followed up with a second at Katugastota last February. This is doing about Rs. 8.5 million worth of leasing business monthly. A new branch in Matara is to be followed with branches in Negombo and Ratnapura whose feasibility is now under study. The circular said that the objective of the rights issue was to service the bank's rapidly expanding fund based activities while reducing its effective cost of capital. Half the Rs. 300 million sought is intended to reduce short-term borrowings which stood at Rs. 314.8 million as at Dec. 1997. The balance is intended for fund based activity. By Kanes The share of South Asia in Sri Lanka's imports has gradually risen from 10.7 per cent in 1993 to 11.4 per cent in 1997, while South Asia's share of Sri Lanka's exports has remained constant at 2.5 per cent in this period. This rise in South Asia's share in imports was on account of the increase in India's share from 8.6 per cent to 9.6 per cent of Sri Lankan imports between 1993 and 1997, while the stagnation of South Asia's share in exports was mainly because of the fall in Pakistan's share of Sri Lanka's exports from 0.9 per cent to 0.8 per cent in this period. It is significant that while Pakistan was the main export market of Sri Lanka in 1993 (accounting for 50 per cent of all exports to South Asia) India displaced it in 1997 purchasing 37 per cent of all exports to South Asia as compared to Pakistan's 32 per cent. The increase in India's purchases of exports more or less offset the fall in Pakistan's share to keep the total purchases by South Asia's constant.
Trade Under SAPTA SAPTA on the other hand, appears to have stimulated imports. In 1996 for instance after the SAPTA was launched, Sri Lanka's imports from South Asia rose by 28 per cent in contrast to a 15 per cent increase in 1995. The share of South Asia in Sri Lanka's imports consequently rose from 10.3 per cent in 1994 and 1995 to 11.9 per cent in 1996; it declined slightly to 11.4 per cent in 1997 with a slowing of the rate of export expansion, but still the share of South Asia in imports in 1996 and 1997 was higher than in the previous three years. Have Tariff Preferences
Helped? First, the trade surplus in preferential trade in a single year does not indicate a trend. Why were figures not given for 1996 and even the preceding years? Was there a trade surplus in those items, subsequently covered by preferences, in 1994 and 1995? Was the preferential trade surplus shown only for 1997 because there were preferential trade deficit in 1996 and in previous years. Further, it is normal in multilateral trade to have a surplus with one country or group in one year and a deficit in the next. For example, Sri Lanka's trade deficits with the Maldives in 1993, 1994 and 1995 were transformed into trade surpluses in 1996 and 1997. Similarly, Sri Lanka's trade surpluses with the Middle East in 1993 and 1994 were turned into deficits in 1995, 1996 and 1997. Thus, the trade surplus in preferential items in 1997 could very well become a deficit in 1998. Second, the trade surplus in preferential items is not necessarily a result of trade preferences. The demand for Sri Lanka's exports could increase in a particular neighbouring country for several other reasons. In 1997, for instance, there was a 60 per cent increase in Sri Lanka's exports to the Maldives as compared to 23 per cent in 1996. If this increase consisted of preferential items, it may explain at least a part of the trade surplus, but the increase itself may have been due to an urgent demand or to meet a shortfall and may have had nothing to do with preferences. Third, the trade surplus in preferential items can result from a fall in imports relative to exports. In fact, this appears to be what had happened in 1997. While Sri Lanka's total exports to South Asia increased by 16.7 per cent in 1997 as compared to 14.6 per cent in 1996, its imports increased by 10.2 per cent in 1997 in contrast to 28.1 per cent in 1996. Thus, the relative decline in import growth was much greater than the relative increase in export growth. Imports from India - the largest source of imports - increased in 1997 by only 6.3 per cent as compared to 29.2 per cent in 1996 and over 20 per cent in both 1994 and 1995, and the share of India in Sri Lanka's imports declined from 10.3 per cent in 1996 to 9.6 per cent in 1997. If imports from South Asia/India had increased in 1997 at the same rate as in 1996, it is very unlikely that there would have been a trade surplus in preferential items in 1997. Fourth, value of trade of preferential items is too small to make a difference to the total trade of Sri Lanka with South Asia. In 1997 for instance, the value of preferential imports from South Asia was Rs. 758 million or 1.9 per cent of total imports from South Asia, while the value of preferential exports to South Asia was 12.6 per cent of total exports to South Asia. As a share of Sri Lanka's world trade, imports of preferential items from South Asia formed a mere 0.2 per cent of Sri Lanka's total imports while preferential exports to South Asia accounted for only 0.3 per cent of its total exports. With the preferential trade at such relatively low levels, it is hardly relevant whether there is a surplus a deficit in it. Uncertain Future SAPTA's future is now threatened by the escalating conflict between India and Pakistan, particularly after the five nuclear tests carried out by India a few days back. Pakistan, in any case was never enthusiastic about SAPTA and has not even extended up to this day MFN treatment to imports from India. It is doubtful whether Pakistan would extend full cooperation to expand preferential trade or to achieve free trade in SAARC under the current uncertain conditions. Any lukewarmness on the part of Pakistan would weaken SAPTA as Pakistan is the second largest trading nation in the grouping and the second largest export market for Sri Lanka. In 1997 for instance, as shown earlier, Pakistan accounted for 32 per cent of Sri Lanka's exports to South Asia and 0.8 per cent of its exports to the world as compared to 0.9 per cent to India. There is a further danger to the expansion of SAPTA from India itself. With economic sanctions imposed by the US, Japan and some others and consequent reduction in foreign aid and investment, the Indian economic growth may slow down and its current account deficit may widen, and this may result in a reversal of trade liberalisation and restoration of import restrictions. This will no doubt tend to restrict access to the Indian market of exports from other South Asian countries and deprive them including Sri Lanka of the benefits they hope to derive from membership of SAPTA. SAARC has agreed to progress from preferential trade to free trade by 2001 through converting SAPTA into SAFTA. Sri Lanka has strongly supported this transformation even when experience of other groupings elsewhere shows that free trade benefits a country with a well diversified agricultural and industrial export base - like India - and harms a country which is building up its agricultural and industrial capacity - like Sri Lanka. In any case, the new developments in India and Pakistan would appear to militate against the establishment of a free trade area in South Asia in the near future. It is time for Sri Lankan authorities who have been expecting much from SAPTA and SAFTA to make a reappraisal of SAPTA and Sri Lanka's export strategy for the future. Colombo as a regional financial centre: Realistic aim or pipe dream By Analyst A financial centre which promotes industry is a development in the Anglo-American model of capitalism where the companies raise equity capital in the stock markets and the commercial banks confine themselves mainly to short term finance required for working capital. Financial contres have flourished in two circumstances! where industry has demanded nimble capital markets. Thus London developed first to finance ventures both locally and abroad carried on by British businessmen and industrialists. The British balance of payments was running large surpluses and British capital flowed into America in the mid nineteenth century to build railroads and infrastructure in U.S.A. Then New York developed to meet the capital needs of the large industrial firms that grew in the second half of the nineteenth century. There were periodic financial crises and American capital came to replace British capital to satisfy American industry. Second, financial centres have waxed when regulations governing them were sensible and waned when they were not. Unnecessary restrictions in U.S.A. led to the development of Euro-dollar market in London. Similar restrictions in Japan enabled Singapore to build a futures and options market trading Japanese securities on SIMEX, Singapore's derivatives exchange. Even Japanese trade on Singapore rather than Osaka because it is 40% cheaper than in Japan. Profile We have a rudimentary financial centre. Although the Colombo stock exchange has a central depositary for shares and trading is screen based, yet the market is undeveloped. We are still in the age of agency broking. Brokers are not allowed to compete on price but only on service. They are not allowed to trade on their own account and develop into market makers. They are not allowed to provide margin trading facilities. Stock lending is unheard of and short selling is prohibited. Many of these practices are prevalent in Bombay and yet we aspire to become a financial centre serving India and Pakistan. The Pakistan Rupee is almost fully convertible. As Mr. Thilan Wijesinghe, the BOI Chairman, referred to in his paper presented at the seminar we need to undertake far reaching reforms in the financial sector. There is little real effective competition among the banks since 60% of deposits are held in the two state owned banks. Their costs are high due to over-staffing and sloppy management. But they set the lending rates and most of the personnel in the newer private banks are those who have grown up in the state owned banks. They are imbued with the same culture. "The state owned pension funds (account) for 90% of deposits and state-owned insurance companies for 45% end 60% of life and general insurance" says Mr. Wijesinghe. The state has too much of a say in the deployment of savings in the economy. Private provident funds should be permitted and the state banks must be corporatised with at least 25% of the shares given to the public. It is only then that the two banks can try to maximise share-holder value. It is only then their actions will be scrutinised by the investing public and their managements can be held accountable for their performance. It is correct that the two state banks will have to continue their role of providing credit to the rural farmers. This role can continue with the government under-writing any losses due to directed lending. The problem of rural credit will not be solved as long as it remains a political matter. Each party promises to write off the loan taken by the farmers at each election campaign. This will have to stop before farmers can learn to become credit worthy borrowers. The banks association seems to be operating like a cartel. They had decided collectively not to pay interest on pass book savings if there are more than four withdrawals a month. In other countries interest is paid on current accounts. A foreign bank which wished to introduce the practice locally was not allowed to do so by the Central Bank. Shouldn't the authorities promote competition if they desire an efficient banking system? Recently the Controller of Imports has relaxed the rule which required all import documents to be channelled only through banks. He has now allowed the foreign supplier to forward documents directly to the local bank without sending them through a foreign bank. This will no doubt expedite the clearing of import cargo. But the controller has left this relaxation to be conceded at the discretion of the banks. One bank has already decided that it will not allow the concession for D/A (Documents on Acceptance) documents. The cartel may decide to curb the relaxation. The banks make money on foreign exchange holdings taking little risk since the Rupee is on a one way street. They make too much profits on import export trading charging the customer for every telex telegram etc., on top of their fees. Is it any wonder they report returns of 20% on equity. The banks must be exposed to market forces and made to compete with each other. Financial Market
Requirements Financial markets benefit when there is a lot of money around. So it suffers when the supply contracts. The entry of the Employees Provident Fund boosted share prices. But their sudden inactivity has caused the market to falter. There will not be enough money to go around in any proposed financial centre. Securitisation, the word coined to describe companies preference for raising capital more cheaply by issuing bonds, shares, commercial paper rather than borrowing from banks, means the commercial banks will lose their clients and go to investment banks. The infant market for commercial paper was killed when the Central Bank stopped banks from under-writing such paper. Merchant banks have run into trouble misjudging the stock market. The tradition of share trading cannot develop unless the brokers are allowed to be dealers. It is the traders who will develop the market, taking a small profit on every deal and providing liquidity to the market. They will acquire the trading expertise by betting more of their own funds to compete with others. Merchant banks unlike commercial banks have to mark their assets to market daily. Our merchant banks refuse to mark down all their investments even at the close of the financial year. They rushed into deals involving not easily marketable securities but illiquid investments like equity stakes in leveraged buy-outs. They started to run before they could even walk. One merchant bank ran up a loss of 1 billion rupees and the chief executive is given a golden hand-shake. A financial market must be fair and well regulated to reduce the risk of default, crime etc., London has the reputation of being a well regulated market, striking the right balance between regulation and freedom for trading. It has drawn a distinction between professional investors and individuals and concentrates on protecting the latter. Our own financial markets are over-regulated leaving little room for market development. It is useless having a well regulated market if there is not enough business. Traders and money-men generally cannot acquire experience and expertise if they operate in restricted markets like our foreign exchange market or stock market. Market on the move Certain types of financial business like mergers and acquisitions and advising corporate clients, providing them bridging finance, leveraged deals etc., require presence close to the borrowers. It is hard for local businesses to raise capital on distant exchanges. Hence it is very necessary to develop the local financial markets before thinking of becoming a regional financial centre. Does it matter? This is not to say that Colombo should not be developed as a financial centre to cater to domestic industry. This is a much simpler task and it doesn't require currency convertibility unlike for developing a regional financial centre. Our currency is too weak and our budget defecits are too large to visualise capital account convertibility for a very long time. If the local financial markets can be developed they could enable local companies to tap capital both equity and debt capital. American industry benefited from the leveraged buy-outs of the 1980's. They would not have been possible without Wall Street's financial infra-structure. Economies prosper when firms can easily raise debt and equity and when investors can effectively monitor and control the behaviour of those firms. Companies in our country cannot afford to raise capital on distant exchanges. So an active local financial centre helps. If Colombo is awash with money then companies from the Indian subcontinent might think of raising money here and even list their shares on the local stock exchange. But only foreign money can fill this need. It was so in Hongkong and even Singapore. But it is not possible to attract foreign funds unless there is a liberal financial environment. Those who talk of our wisdom in not having capital account convertibility don't seem to realise that it is a worth-while if unattainable goal. None of the South East Asian countries that experienced the recent currency crisis have abandoned capital account convertibility except Indonesia where there are no foreign exchange reserves to carry on even current account transactions. If we wish to tap into the international capital markets and obtain comparatively lower interest rates we need to have capital account convertibility. As long as we get foreign aid, a volume of aid which we cannot even utilise, there isn't the same need for tapping foreign capital. But foreign aid will dry up and as we approach middle income status we may not get concessional aid as warned by the Central Bank. So there are advantages in being able to tap into world capital markets particularly the attraction of lowering interest rates. The financial centre not only provides money to the private sector companies. It also provides funds for the government. The market for government securities has a long way to go before reaching maturity. But it can provide an efficient mode for government borrowing. The way ahead was chartred by BOI Chairman Thilan Wijesinghe. One of the criticisms of the City of London, its financial centre, is that it encourages a short turn outlook on the part of both investors and companies. The managers of companies wish to maximise the share price. Investors take a short term view. A company may carry out a long term investment which will boost its earnings in the future. But short term stock market investors will not pay much attention to it. He wants to buy a share that is currently under-valued hoping for a quick gain. So it is said that the short term outlook dampens long term investment. This need not necessarily be so if the companies take the trouble to explain their plans to analysts and institutional investors. There is no reason why the companies should go for short term investments with short pay back periods because of the pressure to maintain their share price. Off-shore centre The demand for financial services has to originate from the Indian sub-continent. Where there is no capital account convertibility either. One suggestion is to expand SAFTA to include free trade not only in goods but also services, particularly financial services so that at least there will be no regulatory barriers to the demand for such services. Diamonds
were NOT Keells' best friend John Keells Holdings Ltd. (JKH) which cracked the billion rupee post-tax profit barrier in fiscal 1997/98, has seen growth in all but one of the business segments covered by its highly diversified portfolio, analysts said yesterday. While there had been a downturn in exports, even that sector had remained profitable, the company's chairman and CEO Ken Balendra said explaining that exports were down only because of the near collapse of the diamond market particularly in the Far East. Keells Diamonds, which holds a de Beer's site, has been in the diamond cutting and polishing business for some years now. This company had felt the bite of the global recession in this industry which had dragged down the group's export performance. Balendra said that the 1997/98 performance of the group was exceptional, surpassing the previous year's performance which itself was an all time record. "We went up from a record base and became the first company in Sri Lanka to cross the billion rupee barrier in after tax profits,'' he said. JKH which accounted for 8.4% of the market capitalisation of the Colombo bourse has told shareholders that the post-tax profit had doubled to Rs. 1.2 billion. The bottom line net of tax and minority interest was a tidy Rs. 808.5 million, the provisional consolidated financial statements reveal. Despite what company executives called "fantastic results'' the JKH share had got caught up in the current downturn on the CSE. Earlier this month, the share hit the Rs. 335 mark at which it was trading before a 1 for 4 bonus issue was made earlier this year. But the price was down to the Rs. 300 level last week. Nevertheless, stock watchers note that JKH like Hayleys is fast acquiring an enviable bonus issue track record. Since January 1996 there had been as many as three bonus issues - 1 for 7 in 1996, 1 for 7 again in February 1997 and 1 for 4 in Feb. 1998 when Rs. 80.2 million in the company's fat share premium account was capitalised. The JKH directors have recommended a final 30% dividend on top of the 10% interim already paid on the increased capital after the last bonus share issue. This will give the shareholders a 40% return. "This year's will be our best ever dividend,'' Balendra said. "The payout is Rs. 155.75 million, up nearly 70% from the Rs. 92 million paid the previous year.'' Smugglers fail to thwart doubled profit at Hayleys Photoprint Hayleys Photoprint Ltd., the Hayleys Group's diversified imaging, information, paper and medical products subsidiary, has reported a substantial growth in profits in the year ending March 31, 1998, despite the adverse effects of smuggling on the company's photographic products market. According to its recently released annual report, Hayleys Photoprint's post tax profits increased by 118 per cent over the previous year to Rs.12.4 million, helped in particular by improved performances in the Photo Materials Department and the Printers' Requisites Department and reduction in the effective tax rate to 27 per cent consequent to an investment tax allowance and the reduction of 5 per cent in the tax rate applicable to listed companies. Pre-tax profits also grew a healthy 69 per cent over the previous year to Rs.17.1million on a turnover of Rs.338 million, in a performance that Hayleys Group Chairman Sunil Mendis describes in his review as "pleasing". Earnings per Hayleys Photoprint share had reached Rs.4.39, a growth of more than 50 per cent, and the Board had recommended payment of a final dividend of 15 per cent, bringing total dividends for the year to 25 per cent. Mr. Mendis has told shareholders that the company now maintains market leadership position in may areas in which it is involved. "We are now into our third year of operation since obtaining the sole distributorship for Fuji Photo Film Co. of Japan. This association had given the company fresh impetus and we believe that it will give the company considerable potential for growth over the next several years," he states. He has however echoed recent concerns expressed by the company and the Fuji Photo Film Company of Japan about the effects of smuggling on the legitimate players in the local photographic products market. "The smuggling of photographic film and paper has now grown alarmingly", Mr.Mendis warns, adding that Hayleys Photoprint, along with three other legitimate importers had sought a reduction in the add-on costs of taxes to CIF from 67 per cent to 25 per cent, to make smuggling unattractive. The year under review saw the entry of Hayleys Photoprint into the medical equipment, accessories and consumables market as the sole agent of Sturdy Industrial Company of Taiwan, and Meditab Ltd., of Israel, two leading manufacturers of medical equipment and consumables. The company has already received two government tenders for the supply of sterilisers and medical gel. The company also undertook the task of restoring the colour laboratory of the Government Film Unit venturing into the field of technical support to the cine film processing industry. The Board of Directors of Hayleys Photoprint comprised Messrs Sunil Mendis, (Chairman ), M.J.C Amarasuriya (Deputy Chairman), R.,A Ebell, E.F.Edirisinghe, G.S.Dewaraja, T.K.Bandaranaike and Ashan Abeysundere (General Manager). Insurance cover will take care of PDL's bomb damage Property Development Ltd. (PDL), the owners of the Bank of Ceylon headquarters building at Echelon Square, had suffered estimated damage of Rs. 247 million in last October's Galadari bomb but has sufficient insurance cover to meet the cost of reinstatement, shareholders have been told. In an interim report incorporating provisional results for the year ended March 31, 1998, PDL has said that its terrorism insurance cover with the Sri Lanka Insurance Corporation was worth Rs. 250 million with the company bearing the first Rs. 1.5 million. Turnover during the year under review, comprising rental income from the Bank of Ceylon which is the company's sole tenant, had remained flat at Rs. 287.2 million while the trading profit of Rs. 175.6 million was down slightly from the previous year's Rs. 178.1 million. Other income of Rs. 52.2 million was down from Rs. 61.9 million earned on that account the pervious year. But the company had been able to add on Rs. 1.1 million provided for the fall in value of investments. The pre-tax profit of Rs. 2298 million compared with Rs. 238.1 million earned a year earlier. Provision for tax had fallen Rs. 79.3 million from Rs. 98.8 million a year earlier enabling the company to post a bottom line of Rs. 199.7 million, up from Rs. 139.4 million the previous year. With unappropriated profits of Rs. 206.3 million brought forward, PDL had Rs. 356 million available for appropriation on March 31, 1998. Appropriations have not yet been decided. The PDL building (Bank of Ceylon Tower) also suffered damage from the earlier Central Bank bomb. First quarter gain at Singer Sri Lanka Singer (Sri Lanka) Ltd. has performed well in the first quarter of the current financial year with both turnover as well as operating profits growing strongly according to provisional unaudited figures provided to shareholders. Gross turnover during the three months ending March 31, 1998, was up 16% to Rs. 942.5 million while the operating profit of Rs. 126.2 million was up 12% from the Rs. 111.3 million earned during the first quarter of the previous year. Lower interest charges more than compensated for reduced other income while the share of associated companies' profits remained flat at Rs. 3.4 million. The pre-tax profit of Rs. 99.1 million was up 25% from Rs. 79.5 million a year earlier. But higher tax provision of Rs. 36 million (Rs. 26 million a year earlier) skimmed part of the cream. The after tax profit of Rs. 63.1 million was up 18% from Rs. 53.6 million earned in the first quarter of the previous year. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NEWS | PROVINCIAL | POLITICS | EDITORIAL | DEFENCE | FEATURES | LEISURE | BUSINESS | ADS |
