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Terrorism cover
sends overheads shooting Colombo office developers are feeling the bite of over-supply with intense competition for tenants keeping rentals flat, the owners of a quoted property development company have reported to shareholders. Equity One Ltd., the Carsons subsidiary which was one of the early developers of an office complex on Dharmapala Mawatha, Colombo-7 said that competition for tenants at present is intense and owners are unable to increase rentals in line with escalating costs. Another problem is heavy terrorism insurance cover. Where Equity One is concerned, this protection guzzles as much as 30% of its overhead expenses. The directors have decided to increase the liability limit on their terrorism cover from Rs. 100 million to Rs. 431 million with the annual increase in the insurance premium costing Rs. 1.2 million. "A further threat is the entrance of competitors who are able to offer sophisticated facilities at relatively low rental rates due to the tax concessions enjoyed by them'', Carsons Management Services, the managers of Equity One said. Mr. Reginald Poulier, the company's chairman, noted that despite the uncertain environment coupled with the high cost of investment and low rates of return in the real estate sector, new additions to the supply of office accommodation continues unabated. He said that in order to get a competitive edge, new developers are offering modern facilities of an international standard while existing companies are upgrading. At the same time rentals remain stagnant. Poulier however remained upbeat saying: "Although in the short term there is likely to be a glut of office space, if the current growth momentum of the economy continues, the prospect for commercial property development in the long term could be attractive.'' Despite occupancy of the company's Dharmapala Mawatha building remaining at 92.6%, Equity One saw turnover during the year ended March 31, 1998 growing 8.6% due to renewal of existing tenancies at a higher rate and operating profits too increasing slightly to Rs. 11.9 million from the previous year's Rs. 10.5 million. Poulier said they had begun a comprehensive refurbishment to be carried out in phases. He expected that the completion of phase 2, involving granite work at the entrance and the lift lobby walls, which has now begun would considerably enhance the marketability of the property once the work is completed. Discussing prospects, he said that a forecast was difficult given the regional uncertainty. But if business sentiment improves and the current stability and growth in the economy is sustained, "your company is bound to benefit''. The company has recommended a final 8% dividend on top of the 5% interim already paid. The directors of Equity One are Messrs. R.F. Poulier (chairman), H. Selvanathan, W. Unamboowe, C. Wijenaike, S. Nagendra and K.C.N. Fernando. |
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Business analysts last week expressed concern about the continuing fall in tourist arrivals attributed both to the terrorist attacks in Colombo earlier this year as well as increased price competition in the region, especially from Thailand, Malaysia and the Philippines. Provisional Tourist Board data indicated that May arrivals at 20,400 were down 9% from a year earlier. This followed an average 5% drop in March and April. These losses have hurt the annual picture with cumulative arrivals for the first five months of the year down 0.2% year-on-year to 150,741, Asia Securities said. The sharp depreciation in their currencies has led to competing destinations offering very cheap packages. Bangkok, for example, is offering twin-sharing accommodation with full board for as little as USD 10. "We also attribute slow growth in May to increased concern over South Asia following the nuclear tests carried out by India and Pakistan and the riots in Indonesia, all of which seem to have diverted tourist attention to alternative destinations outside Asia,'' the analysis said. It made the point that as Sri Lanka had tended to attract the lower end of the market, the current lower room rates elsewhere together with the heightened security perceptions in the country would take its toll. "Even assuming a relative calm over the next six months and consequent pick-up in arrivals during the second half of the year, tourist targets are unlikely to hit our full year target of 388,000 (that is up 6% from a year earlier),'' Asia said. With arrivals falling and more rooms available in the resort hotels, resort hoteliers are likely to see both a fall in occupancy as well as a drop in tier room rates. ?Asia expected average occupancy in the resorts to drop from 55% to 40% and rates to drop 8% in dollar terms but remain flat in rupee terms. "However, city five-stars are unlikely to be similarly affected given their greater exposure to more stable business travellers and also due to the loss of 17% of the room supply following the World Trade Center bomb in October 1997,'' the report said. |
Ten-year best at Walkers Tours Walkers Tours Ltd., the John Keells Holdings inbound and outbound tour company, have posted a 10-year best result in the financial period ending March 31, 1998, thanks especially to what its chairman said was an "excellent performance'' by the airlines division. Describing the year in review as one which showed an "impressive improvement,'' the company's chairman, Mr. Ken Balendra, said that that while visitor arrivals to the country had increased 16.4% last year, their own traffic handled was up 27.3%. Turnover had grown 79% to Rs. 238 million while the pre-tax profit had surged to Rs. 79.7 million from the previous year's modest Rs. 2.5 million. After providing Rs. 21.5 million for taxes, the company posted an after-tax profit of Rs. 58.2 million. Shareholders who got no dividend the previous year will get a bumper 45% after the company's annual general meeting on July 1. Balendra said that the financial year began on an encouraging note with increased summer arrivals enabling the winter season to begin on a positive note. On top of that, high revenue incentive groups in the last quarter of the year between January and March had contributed significantly to the overall performance. While the primary Western European markets had performed exceptionally well along with Hongkong, the performance from Japan was disappointing largely due to the security situation. Fortunately, the World Trade Center bomb in October and incidents in the last quarter did not have a major negative impact on arrivals. "But if not for these setbacks, the overall performance would have been even better.'' Walkers Tours had been aggressively promoting Sri Lanka with emphasis in the major generating markets in Western Europe, Middle East and Asia. Eastern Europe and Russia have been identified as areas with potential for future growth and the company had played an active role in travel fairs held in the Czech Republic, Poland, Yugoslavia, Hungary and Russia which had yielded "satisfactory results.'' "We also continued to aggressively promote tourism from India which is yet to produce the desired result,'' Balendra said. He thanked the authorities for allowing new charters to fly to Sri Lanka last year. There had been times when there was an acute shortage of airline seats. Charters had helped traffic particularly from the UK and the Netherlands. The company's airlines division represents American Airlines, Asiana Airlines, Canadian Airlines International and LTU as general sales agents. In addition to passenger traffic, expanding exports helped cargo volumes permitting a good performance. The directors of the company are Messrs. K. Balendra (chairman), V. Lintotawela, C.J. Fernando, S.C. Ratnayake, V. Leelananda (managing director), M.T.L. Elias, Ms. R.S. Goonawardene, J.E.P. Kehelpannala, Ms. J.C. Ponniah and R. Siriwardene. |
Foreigners bail out of Colombo stock market Foreign investors sold out of the Colombo stock market to the tune of Rs. 423 million net in May, the CSE reported in its monthly market report. The all share price index (ASPI) had shed 99.8 points (13%) and the sensitive price index (SPI) 212.5 points (17%) during this month to close at 682.3 and 1024.1 respectively, the CSE report for May said. The tumble has been continuing through June with the ASPI plunging below the 600 point barrier to 568.8 on Thursday while the SPI was down to 827.8 with no sign yet of the fast fall being arrested. The CSE attributed the recession, in the teeth of excellent corporate performances, to "prevailing unsettled conditions in the region causing foreign investors to move out.'' The blue chips have taken a very bad beating with market heavies like JKH, DFCC and the NDB coming down to undreamed of lows soon after they had posted superior results. The CSE said that foreign purchases last month accounted for 20% of total purchases with foreign sales at 35%. Stock markets worldwide continued to slide with Wall Street (Dow Jones) depreciating 2% while London shed a percentage point as measured by the Financial Times index. But the Tokyo exchange moved up one point. Regional markets depreciated significantly with both Hong Kong and Kuala Lumpur shedding 14% each. The nuclear tests on the subcontinent were blamed for Karachi dropping 33% and Bombay 8%, according to the CSE report. |
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Sathosa Motors Ltd. have appointed three new directors, Messrs. Sumal. J.S. Perera, R.D. Abeysekera and D.R. de Silva, the Colombo Stock Exchange has been notified. Mr. G.R. Armstrong has come on the Ceylon Tobacco board succeeding Mr. A.C. Johnston who has resigned. Other new board appointments in quoted companies are Mr. K.K.L. Piyasena (CT Land Development Ltd.) in place of K.A. Wijesekera who has resigned; Mr. K.N. Bhattacharya succeeding Mr. G.T. Welch who has resigned from Reckitt and Colman of Ceylon; and Mr. Vish Govindasamy who has resigned his place as managing director of Watawala Plantations and become and ordinary director. |
| Globalization and the labour market in Sri
Lanka - 1 by
Kanes Globalization has resulted in most developing countries in a shift to free market economies and private enterprise and an increasing emphasis on emasculation of the role of the State through deregulation, decontrol, denationalization or privatization and allowing market forces to determine the allocation of resources in order to increase efficiency and competitiveness to maintain or expand their share of the global market. These economic reforms and structural changes in response to globalization have far reaching effects on employment, wages, income distribution, social benefits and labour legislation which directly affect millions of workers in developing countries. Some of these effects may be favourable while others may be harmful. As well functioning labour market institutions which ensure social harmony are an essential prerequisite to sustained rapid growth, it is important to study the implications of globalization on industrial relations. Perhaps no other region in the world has experienced globalization or cross-border production as East and South-East Asia. A large number of multinational corporations as well as smaller enterprises particularly Japanese have invested on a large scale in the region to exploit their cheap labour to produce goods on competitive terms for the world market. Foreign investment and technology helped to expand their exports, accelerate growth, create employment and incomes and reduce poverty, first in the four newly industrializing economies (South Korea, Hong Kong, Taiwan and Singapore) and subsequently in Malaysia, Thailand and Indonesia. China is the largest recipient of foreign direct investment among developing countries in spite of her controlled economy. East and South-East Asian economies having prospered with foreign investment and facing escalating labour costs, have themselves now become investors in other Asian developing economies particularly in labour-intensive export production such as garments, toys and footwear. In the period 1986-1992 for instance about 70 per cent of the foreign direct investment flows into China, Indonesia, Malaysia, Philippines and Thailand were from other countries and territories in the region, mainly the four NIEs (South Korea, Hong Kong, Taiwan and Singapore) and only 18 per cent from Japan. South Asia on the other hand, has received relatively little foreign investment and this has been a major cause of its slower growth. Nevertheless, they are liberalizing their trade and investment regimes to attract foreign capital and technology to expand their exports. They have attracted some foreign capital mainly for labour-intensive industries like garments, which have become their leading export. India, however, is an exporter of engineering and light capital goods. All South Asian countries are exporters of labour to the Middle East and East and South-East Asia and foreign exchange remittances from migrant workers form a major source of their foreign exchange earnings. Economic Liberalization
in Sri Lanka The Sri Lankan rupee under these reforms is tied to a basket of major currencies and floats freely on the market. State monopolies have been terminated except for wheat imports and by the end of 1996, only 223 items out of a total of around 6000 items of six-digit Harmonized System Code (HSC) level remained under import license control, mainly for national security, public health, phyto-sanitary and environmental reasons. Exports have all been decontrolled except for four small items. Export duties have been abolished while import duties have been reduced from time to time to three banks - 35 per cent, 20 per cent and 10 per cent.The effective import duty, i.e. import duty collections as a proportion of the value oftotal imports was 8.8 per cent in 1996. Virtually all price controls have been removed. Income taxes have been reduced with the maximum at 35 per cent. A large number of State-owned enterprises - tea, rubber and coconut plantations, industrial undertakings, trading corporations, bus transport, air transport telecommunications and others - have been wholly or partly privatized and foreign capital is being invested in several new industrial and infrastructure undertakings. Foreign Direct Investment increased from Rs. 710 million in 1980 to Rs. 9,107 million in 1993 but fell thereafter to Rs. 7,587 million in 1997. The greater part of this investment was in export-oriented industries particularly garments in the newly established Export Promotion Zones. Perhaps the most significant change brought about by inflow of foreign direct investment associated with liberalization was the industrialization of the economy to transform the economy from an undiversified primary producer to a diversified one. The share of agriculture in the GDP declined from 26 per cent in 1978 to 18 per cent in 1996 while that of manufacturing rose from 15 per cent to 21 per cent in the same period. Agricultural exports fell from about 80 per cent of total exports to 23 per cent whereas manufactured exports increased from 14 per cent to 73 per cent between 1978 and 1996. Among the manufactured exports the largest was textile and garments which accounted for 46 per cent ofthe country's total exports and 63 pe cent of manufactured exports in 1996. Economic growth was generally higher in the eighties and nineties after liberalization than in the seventies before liberalization. Greater Trade
Orientation Labour-Intensive
Industries Emasculating the Role
of the State Tax revenue too has declined from 24.2 per cent of GDP in 1978 to 16.9 per cent in 1996 reflecting the abolition of export duties; reduction of import duties and income taxes. Labour Force The labour force participation rate or the ratio of working age population actively seeking employment to the total working age population in 1997 was 48.3 per cent - 65.7 per cent for males and 33.1 per cent for females. The labour participation rate of females in the age group 25-34 shows a dramatic rise from 27.6 per cent in 1946 to 44.8 per cent in 1996 as a result of expanding employment opportunities in the export promotion zones/garments industries and the services sector. Unlike in the past the majority of new entrants to the labour force have obtained primary and secondary education: in the 15-19 age group, 20 per cent had primary education and more than 50 per cent had completed secondary education in 1971. Structure of Employment In 1997, approximately 1,072,000 or 19.2 per cent of the emplolyed were in the public sector 762,000 in the government sector proper and 310,000 in the semi-government sector (public corporations etc.). The majority — 4,499,000 or 81 per cent of the employed were in the private sector. Further, about 61 per cent of the employed are paid employees, the balance 40 per cent consisting of workers on own account (27 per cent) and unpaid family workers (10 per cent). |
| The crisis in the Stock Market By R. M. B. Senanayake The net outflows by foreign investors is shown below for the recent weeks.
It must be noted that foreign funds deal in large parcels and often they are unable to sell because there are no buyers for large lots and even then only at a substantial discount. Our market is said to lack liquidity. Fortunately for such foreign funds the Employees Provident Fund (EPF) entered the market for the first time with the Aid Group meeting due in June in Paris. The EPF bought up shares in the plantation sector which drove up the prices of such shares to unsustainable levels in terms of prospective earnings for the current year which are likely to decline owing to the increase in wages of the plantation workers. The EPF seems to have avoided the popular banking sector. Retail Investors Although brokers in our market are not allowed to provide margin finance or to allow roll-over, there have been permitted to give a grace period for buyers. The brokers were required to force sell shares for default only on T+15, 15 days after transaction date thus allowing brokers to give temporary credit and recover interest at a penal rate. Forced Sales Shooting the
Speculators Speculators in the stock market were thus dealt a kidney punch by the Securities and Exchange Commission. Retail speculators were able to turn in a profit over the 15 days allowed before compulsory sale. They could do so by careful stock picking, by buying shares at prices close to their recent minima and selling at a small profit before the date of compulsorily sale. With the shortening of the grace period to T+8 the scope for this type of trading is now gone. The SEC was no doubt concerned about the risks taken by the broker firms. Several broker firms are under-capitalised in relation to their turnover. There is a risk attached to giving a long period for settlement of outstanding contracts. But fifteen days is not particularly long and is in line with traditional practice in stock markets. London had a two week settlement and Paris even a month long account period. In any line of business there are credit risks unless there are only cash transactions. CTC Eagle Insurance Co Ltd in their quarterly report, refers to an insurance broker who had collected insurance premia from several clients and had not paid to the company. This is despite an instruction issued by the controller of Insurance to the broker to make payment. The company has initiated legal action to recover the premiums. So, stock broking firms are not the only ones to face risk of default. But stock brokers give credit only when the client has sufficient other shares in his portfolio to provide a margin to cover a market loss arising from forced sales. What regulators should do is to regulate the margin at a time of high volatility. If the stock brokers act prudently in carrying out client orders, there is no real danger. Of course neither the Securities Exchange Commission nor the Stock Exchange seems to have much faith in the prudence of the brokers and have always confined them to pure and simple agency brokerage where brokers merely act on the orders of clients and only collect the brokerage fee. One wouldn’t be surprised if these authorities even ask for clients to pay in advance for their purchases of shares. They don’t appreciate the culture of stock markets with their inevitable speculative aspects. Stock markets are not super-markets where goods change hands for cash. Financial regulators are also worried about what is called ‘systemic’ risk — the chance that failure at one financial firm will lead to knock-on failures at others, upsetting the whole financial system. That is why most countries require firms to have chunks of capital to cover themselves in case things go wrong. Getting the size of net capital right is crucial — too low and systemic risk remains potent, too high and it creates a barrier to firms entering the market and puts unnecessary pressure on return or capital. Capital cannot be kept idle. It must provide a return or as the Chinese say capital must not be allowed to go to sleep. Our local brokerage firms, at least some of them, are under-capitalised. They cannot afford to extend a 15 day credit period unless they have sufficient capital. But why penalise those firms that have adequate capital to do so. Those firms that lack sufficient capital should be asked to raise their capital gradually if they are to be allowed to give credit to clients. The amount of net capital required may be tied to the riskiness of the portfolio. Some shares are highly liquid while some others are not. The riskiness depends on the fluctuations in the value of the portfolio from week to week. If shares are unpaid for, the amount of money at risk is not the full value of the portfolio but only the fall in its value which over a short period like 15 days could hardly exceed 25-30%. So what is required is to cover the likely fall in value of the client’s portfolio. If a client has other shares in his portfolio which covers 30% of the value of unsettled contracts wouldn’t it be sufficient. There have been many empirical studies in USA that looked at the effects of margin requirements on stock market volatility. Merton Miller of the University of Chicago concluded after one such study that a 1% increase in margin requirements was associated with a negligible 0.04% increase in volatility. (Journal of Finance March 1990). Should the Securities and Exchange Commission be so concerned about the volatility of the market and the 15-day grace period for settlement. Shouldn’t the SEC encourage the netting of transactions and even promote the lending and borrowing of securities among participants, another avenue of income to brokers and unit trusts. But the latter requires putting in place what is called ‘delivery versus payment’ settlements under which shares and cash cross on the same day. It will re-assure foreign investment funds about the risk of broker default. Is speculation bad Volatile markets One cannot equate speculation in stock markets to speculation in the currency market. Excessive volatility in the currency market is not acceptable because it affects every nook and corner of the economy unlike in the case of the stock market. The stock market will not be attractive if share prices were to rise only with the growth in earnings of the companies which will mean long run investment. Those who play the stock market have a much shorter time perspective. The Sri Lankan economy is battered by war with bombs going off frequently. Given the hopeless situation with regard to the resolution of the ethnic problem, with no feasible solution in sight and no end in sight for the war, hardly any investor will have faith in the long term prospects of the country. Investors ask the brokers about the prospects for share prices over the next few weeks and are anxious to pick up the latest rumour and share ramps. So if speculation is to be ruled out completely, there will be a decline in the volume of shares traded. A lower volume of trading will not generate enough commission or brokerage income to be shared among the fifteen broker firms. Outlook But there are few alternative investment channels. In a bear market not many will put money into unit trusts which at best seek to mimic the performance of the stock market. Interest rates on fixed deposits and savings deposits are set by the cartel of bankers and finance companies. They will keep them low although the Average Weighted Prime Rate on lending has been climbing slowly. Little information is available on the property market and the quoted property owning companies are not making much money on rentals. Property is also a lumpy investment. So the stock market will continue to be attractive even if the speculators will now have to fork out their own money. |
| New computer banking service from Sampath By Azhara Raban This service will enable clients of Sampath Bank, sitting at home or in their offices, to access a wide range of banking through their computers, said Tony Weerasinge, CEO of Millenium IT. He said, millenium IT is providing Sampath Bank with a web-enabled banking system for the first time in Sri Lanka. "Sampath Bank's new online financial service breaks traditional banking boundaries thus bringing about a revolution in Sri Lanka's banking sector", he added. Kumar Abayanayaka, CEO of Sampath Bank, said the changeover from the former centrally driven system to a distributed open system as offered by Millenium IT and Infosys Technologies was a strategic decision to keep pace with technology changes, to adapt to newer advances on a timely basis. They were also looking at a business solutions package that was year 2000 compatible. In addition to Bancs 2000, the integrated retail and corporate banking solution, Sampath Bank has also selected BankAway, the remote-banking platform from Infosys to deploy banking services over the internet. This will be another first for the bank and will herald a new era in electronic banking services in the country, he said. Infosys' Banking Business Unit (BBU), has over a decade of experience in banking technology and consolidated expertise in internet technology, security consulting and on-line transaction processing technology. |
Kelani Tyres struggle to get back on track Kelani Tyres which has been bedeviled by labour problems for most of its existence as a private sector entity has concluded another heavy loss making year posting an after-tax loss of Rs.107.3 million for the year ended March 31, 1997. The losses during the year under review had wiped out a retained profit of Rs.69.6 million on its books and the company was carrying a Rs.37 million loss as at March 31, 1997, according to the annual report and accounts now in shareholder hands. The company had previously sold off excess land and property to ballast its profit and loss account. The company's chairman, Mr.Chanaka de Silva said that both production and turnover were down during the year under review. the unions had agitated for what he called an "unreasonable" 40% salary increase and begun a strike in January last year resulting in total loss of production in February and March. The company had lost heavily as a result. In these circumstances, the board had decided that they should recommence operation only with a completely new workforce committed to the workplace. Shareholders had got no returns due to continued industrial unrest despite employee remuneration being raised 50% since privatisation. "We recommenced operations in December 1997 with a totally new workforce who are being trained from inception on internationally accepted norms, standards and practices and we are confident of achieving a production level of 26 mt a day within 15-18 months," de Silva said. He said that at this level of productivity employee remuneration should not exceed Rs.60 million per year. This compared with the Rs.173 million spent of wages in fiscal 1995/96. Within the first six weeks, production had reached 6 mt. a day with all factory production shops excluding vulcanizing working only a single shift. Kelani has also entered into a memorandum of understanding with Associated Ceat (Private) Ltd./Ceat Ltd. of India for a strategic alliance in the context of a highly competitive environment within the tyre industry. Stiff competition is expected from South East Asia with regional currency depreciation. The initial stages of this strategic alliance was in place with the training of new recruits. The alliance partners are carrying on valuations. De Silva said that his board will take a final decision on the alliance "shortly" and promised that it would be in the best interest of the company and its shareholders. The directors regretted that no dividend was possible. The directors of the company are Messrs.Chanaka de Silva (chairman), Rohan. T. Fernando (managing director), Lasantha. P. Fernando (executive director), T. Bevan Perera (executive director), H.S. de Silva, M.N.Cader (nominee of the Merchant Bank of Sri Lanka who resigned with effect from 29.7.97) M.G. Barnard and D.Pegler. |
Price and crop gains give TSFL another boom year Tea Smallholder Factories Ltd. (TSFL), privatised by the government in 1994, has recorded what its chairman, Mr. Chandra Wijenaike, called "another excellent year'' with both crop and price gains enabling a Rs. 130 million pre-tax profit, up 30% from the previous year's Rs. 100 million. John Keells Holdings (JKH) (36.75%) and Central Finance (19.69%) are the major stakeholders in the company with a controlling interest between them. The other major shareholders are the NDB (12.17%), Tea Plantation Investment Trust (8.28%) and the Regent Sri Lanka Fund (3.93%), The company operates eight bought leaf factories in the low country and is now completing the ninth at Nivitigala in the Ratnapura district. A total investment of Rs. 175 million in this state-of-the-art factory is envisaged of which Rs. 140 million will be on stage 1 which will provide a processing capacity of 840 tons per annum rising to 1,560 per annum on completion of the second stage. Wijenaike has told shareholders that the focus of the country's tea production has moved from the upcountry to the low elevations which today produce over half the national crop thanks largely to the expansion of the smallholder sector. "This sector (comprising growers, dealers and bought leaf factories) has gone from strength to strength in the last few years and now dominated the industry,'' Wijenaike noted. "Today well over 60% of smallholder and proprietary tea lands of Sri Lanka are in the low country districts of Galle, Matara and Ratnapura where the yield levels are a good 25% above the national average.'' He said that some well-maintained smallholdings and private gardens boast yield levels comparable to those of other producing countries known for high yields. They were privileged to have their factories in these high yielding areas. In the year under review, TSFL had purchased 28.9-million kg. of green leaf from smallholders, up 10% from a year earlier. Premium prices were paid to suppliers up to a maximum of Rs. 24.78/kg. of green leaf, three rupees higher than in the previous year. The company continues to educate growers on good agricultural practices with seminars and field demonstrations augmented by audio-visual aids. Wijenaike expected that the commissioning of the new factory and advisory services provided to help growers to counter the ill effects of El Nino, they looked forward to ``reasonable progress in the ensuing year.'' The directors have recommended a 15% final dividend on top of the 10% interim already paid to give shareholders a 25% return for the year, up from the previous year's 17.5%. The directors of the company are Messrs. C. Wijenaike (chairman), K. Balendra (deputy chairman), V. Lintotawela, J.S. Ratwatte, V.A.A. Perera, L.D. Ramanayake, T.M. Dunuwille, W.D. Barnanbas, Dr. D.S.A. Samaraweera and M.O.F. Salieh. |
| Dankotuwa
Porcelain gets ISO 9001 By Sanjeevi Jayasuriya He told a press conference last week that this is the first porcelain factory in Sri Lanka to obtain the ISO Certification. It would enable the company to capture new markets in the European Union and the USA where ISO certification will become necessary requirement in the near future to export goods to those countries. The validity of the certification would expire in year 2000 and the Institute would review the stardards of the company to decide on awarding the certification again. He said that at present the factory is running at full capacity. The main buyers are USA, Italy, Spain and India. About 60 per cent of the raw material used is obtained from local suppliers while the balance comprising china clay, talc, zink oxide and colour are imported. |
Seminar on lending to small and medium enterprises A seminar on lending to small and medium scale enterprises organised by the Central Finance Department of the Central Bank in collaboration with the National Development Bank (NDB) will be held on July 2 at the auditorium of the Rural Banking and Staff Training College of the Central Bank. The seminar, to be inaugurated by the Central Bank Governor A.S.Jayewardene, will focus on a new loan scheme known as the Small and Medium Enterprises Assistance Project (SMAP). It has been allocated about Rs.3500 million for lending to small and medium enterprises.. Entrepreneurs, whose capital is less than Rs.10 million excluding land and buildings, could obtain loan facilities up to Rs.10 million for establishment of a new industry, expansion and modernisation of existing ones and for enhancement of permanent working capital, Central Bank sources said. They said that some 18 categories of projects are eligible for loans under SMAP. These categories include food processing, textiles and garments, metal products, construction materials, rubber products, wood and wood products, leather and allied products. plastic products, printing and paper products, chemical products, agro industries, animal husbandry, construction contracting, transport, storage communication and miscellaneous service industries. The funds required for this scheme have been obtained through a loan amounting to US $ 55 million from foreign lending institutions with the assistance of the Asian Development. Bank All the leading financial institutions in the country are participating in this scheme. The NDB functions as the apex lender while the Central Bank provides credit guarantees. |
Conference for student managers of banking units The Hatton National Bank (HNB) recently held a conference for students who are managers of the banking units in their schools. An HNB spokesman said that over 75 students from 30 schools participated together with their respective teachers. Many of the students were from the outstation areas such as Ambalantota, Hambantota, Anuradhapura and Balangoda. The one-day conference inaugurated by HNB Managing Director Rienzie T.Wijetilleke included lectures on key areas of importance for the students who are mainly from the commerce streams in advanced level classes. The role of the student banker in the economy, the use of technology in modern banking, rural banking and international banking were among the presentations made. The "Students' Savings Unit Managers" are trained in various aspects of management and administration of these units and the conference was part of this process, a HNB spokesman said. HNB at present maintains over 30 such savings units in schools throughout the country and they plan to expand this to more than 50 by the end of the year. |
Complaint to SEC A shareholder of Lanka Ventures Ltd. (LVL) has complained to the Securities and Exchange Commission of Sri Lanka (SEC) that the DFCC Bank "may have intentionally run down the share value of LVL since Aug. 1997 to engineer a takeover bid.'' He said that the DFCC acquired its original 36.6% stake in the company at the ten-rupee par value of the shares. Buying additional shares at a lower 4-rupee price "may be to reduce'' the cost per share of the investment, he alleged. Mr. Kumar Paul, Director General of the SEC, said that the complaint had been received and was being examined by their investigations division. It was too early to comment any further about the matter. Mr. M.R. Prelis, Director/CEO of the DFCC Bank, said that they welcomed any investigation "with open arms.'' As the DFCC Bank's annual general meeting is due to take place on Tuesday, it is expected that questions relating to LVL, in which the bank now holds a controlling interest, will be taken up. The DFCC recently added to its stake in troubled LVL by acquiring an 18% stake in the company at a price of Rs. 4 per ten-rupee share. Under the rules of the Colombo Stock Exchange it must now make a mandatory offer of the same price to remaining shareholders. While the original investors in LVL paid the par value for the company's shares, the shares were priced at Rs. 20 at the 1995 initial public offer. The DFCC bought the Japanese shareholding in the company held by Nippon Investment Finance Ltd. (10.9%) and Asia Pacific Ventures Ltd. (5.6%) and small parcels held by small investors. In addition to the DFCC, the other major shareholders of LVL are the Asian Development Bank (14%), Hatton National Bank (10%) JKH (3.6%), Asia Capital (2.5%) and Forbes Capital (2%). There are some foreign fund managers with stakes of under 4%. LVL's CEO left the company in August last year and according to the complaint made to the SEC, the decline in the company's share price was subsequent to this. There is a dispute between the former CEO and the company before a Labour Tribunal. LVL is currently managed by the DFCC which hopes to turn it around. |
Thos. Cook boss new chief of IATA Sri Lanka At a colourful ceremony held at Hotel Taj Samudra on June 18 in the presence of a distinguished gathering, Mr.Ananda Dhatabaya , General Manager of Thomas Cook Overseas Limited was elected president of International Air Transport Association (IATA) of Sri Lanka. IATA Sri Lanka comprising of the cream of outbound air ticketing industry accounts for over 70% of the trade volume in Sri Lanka. The association is affiliated to its head office in Geneva and is coordinated by the regional office in Singapore. The incoming president said that during his tenure he would endeavour to achieve success in three important areas in the travel field. "The first is the reinforcement of the market development programme (MDP) which has enabled travel agents to earn better yields and improve their organisations. MDP is the life blood of the ticketing industry.
"Finally, we should keep abreast of the technological and educational developments in the field. The services of our head office and the regional offices would be utilised to advance our knowledge in this area". Dhatabaya paid a tribute to all past presidents commencing with the founder president, Udaya Nanayakkara, and ending with the out going president, Nilmin Nanayakkara. "The surnames are a mere coincidence and does not mean that we pass the presidency to relations!", he joked. Dhatabaya was promoted general manager of the Sri Lankan operation of the Thomas Cook Group in August 1993. |
Controversy over Top Ten business awards A controversy has erupted over some of the criteria used by Business Today magazine in selecting the Top Ten successful companies in Sri Lanka recently. A spokesman of the magazine refuted comments by the National Development Bank (NDB) that the weighting given to the different criteria in making the selections seems a little arbitrary. The spokesman, Dinesh Weerakkody, said that while appreciating the comments made by NDB in relation to the Top Ten selection process, he did not agree with the comment that the weightage given to the different criteria were arbitrary. He said the weights were done by taking a mean score arrived after asking a sample of senior executives to place a value for each of the eleven criteria and that the weights were then used uniformly and there was no variation whatever in the weightage. Referring to the eleven criteria, Weerakkody said that it was decided by a sample of 25 professionally qualified people. As for the question of productivity, Weerakkody stated that sufficient recognition had been given by incorporating profit per employee, though the weight assigned for this was lower than what was assigned for turnover and profit. He said that Business Today had identified the need for the Top Ten to be more timely and the need to incorporate qualitative factors. This was stated at the awards ceremony he said. Weerakkody was commenting on a press release issued by the NDB which said that the magazine conducted the Top Ten awards basing selection on the financial performance of the companies listed on the Colombo Stock Exchange. In the belief that the award should reflect the popularity of the companies as investment opportunities, the judges selected the companies from the 100 most traded shares in terms of value. It said the criteria examined by the judges to determine the ratings were : sales, turnover, profitability, growth in profitability, return on equity, earning per share, profit per employee, market capitalization, value of shares transacted, dividend per share and volume of shares traded for the financial year 1996/97. The press release said that for the second year running, NDB was the highest profit earner amongst the companies. It was also rated number one when listed according to the highest dividend declared per share. In productivity and employee statistics, the Bank recorded the highest profits earned per employee and was ranked second for the highest employment related costs per employee. It said NDB topped the list in 3 of 12 criteria used, came second in one and third in two. In totality, it had the highest number of top three rankings of all the companies. The overall winner, Hayleys topped the list in one category only (sales turnover) and came second in rate of growth of sales turnover. The second overall, John Keels, was placed first in growth in profitability and second in sales turnover. THE CEO of NDB, Ranjit Fernando, commenting on the judging of the competition felt "the weighting given to the different criteria seems a little arbitrary", the press release said. It added that profitability, ROE and employee productivity ought to be priority criteria and it seems a little unclear as to how Business Today ranking is established. |
No dividends from Ceylon Printers Group Ceylon Printers Ltd. has posted an increased turnover but reduced profitability in the financial year ended March 31, 1998, according to provisional results now with shareholders. The company had boosted turnover to Rs. 12.8 million during the year under review from the previous year's Rs. 10.3 million. But the trading profit of Rs. 1.3 million was down from Rs. 1.6 million a year earlier. The company's after tax profit Rs. 1.1 million was down from the previous year's Rs. 1.5 million. Ceylon Printers has a modest issued share capital of Rs. 350,000 and reserves of Rs. 8.8 million. Its associate, Office Equipment Ltd., with an issued share capital of Rs. 0.8 million and reserves of Rs. 6 million also saw reduced turnover down to Rs. 25.9 million down from Rs. 32.4 million a year earlier and a trading loss of Rs. 1.6 million, down from a Rs. 1 million profit the previous year. The after tax result was a loss of Rs. 1.6 million, down from a profit of Rs. 0.7 million the previous year. Kalamazoo Systems Ltd., the third company in the Ceylon Printers Group, boosted both turnover and profitability in the year under review. Turnover was up to Rs. 32.2 million from Rs. 25.8 million the previous year while the trading profit of Rs. 0.5 million compared with the previous year's Rs. 0.4 million. Other income boosted the Rs. 1 million of which Rs. 0.5 million will be absorbed by taxes. This company has a share capital of Rs. 0.5 million and reserves of Rs. 16.4 million. No dividends have been proposed by the group companies. |
Insurance did
not cover total damage The Colombo Stock Exchange had incurred a loss of Rs. 2.6 million as a result of the bomb explosion in the Hotel Galadari car park in October last year as its insurer has not accepted liability for the total damage sustained. The CSE is located in the World Trade Centre building which was targeted by this terrorist attack. According to CSE's 1997 report, the exchange had to write off Rs. 46.1 million worth of fully or partially damaged property as a result of the blast. The insurer had accepted a liability of Rs. 43.5 million and paid Rs. 19 million on this account to date. The uncovered part of the loss was Rs. 2.6 million. CSE Chairman Rienzie. T. Wijetillake has warmly complimented the staff of the exchange, led by Director General Hiran Mendis for the "gallant manner'' in which they faced the bomb blast which completely destroyed their offices. "They rallied round as a team and succeeded in commencing trading on the very next working day after the blast, which speaks volumes of the spirit in which they worked together'', he said. The year under review has seen the CSE, which had an automated trading capability way ahead of the state of development of the country and the size of the stock market, posting an excess of income over expenditure of Rs. 42.5 million during 1997, up from the previous year's excess of Rs. 22.6 million. The CSE has 15 broker members at present. This will rise this year with the DFCC Bank receiving approval to set up a stockbroking operation and another application currently under review. |
Habarana Lodge dips into reserves to maximise tax free dividend Despite a 22% turnover increase on the back of improved tourist arrivals last year, Habarana Lodge Ltd., John Keells Holdings' newer hotel in Habarana had been able to record only a marginal improvement in profitability during the year ended March 31, 1998. Reporting to shareholders, the company's chairman, Mr. Ken Balendra, attributed flat profitability largely to the increased cost of giving guests improved facilities and better food over the past year. The company which has paid an interim dividend of 20% will pay a further 20% utilising tax-exempt brought forward profits, Balendra said. Part of this dividend payment is being funded by a Rs. 10 million transfer from reserves. The company is liable to tax on earnings from 1998/99 onwards. The 40% dividend is the highest the company has paid in the last six years. Kandy Walk Inn Ltd., another JKH hotel company, similarly maximised its final tax-exempt dividend with a 127.5% payment part funded from reserves. Balendra said that "The Lodge'', built subsequent to the success of "The Village'' which took advantage of servicing tourists to Trincomalee as well as Sigiriya, Dambulla and Polonnaruwa, had received highly appreciative comments both from foreign tourists as well as local guests. "The refurbishment undertaken in past years is now paying rich dividends, and we hope to complete a few additional improvements,'' he said. These include an ayurvedic herbal centre very popular with tourists and a sound proof discotheque which would enable patrons to enjoy themselves without disturbing the entire resort. "We hope to continue adding on more facilities that will make this a total resort with the intention of encouraging our clientele to prolong their stay in your hotel,'' Balendra said. The directors of the company are Messrs. K. Balendra, V. Lintotawela, CJ Fernando and B.S.H. Mendis. |
Lanka Tiles returns to profitability Lanka Tiles has returned to profitability in fiscal 1997/98 after incurring a modest Rs. 2.7 million trading loss the previous year, the company's provisional results for the year ended March 31, 1998 reveals. According to these results which are subject to audit now with shareholders, the company posted a trading profit of Rs. 63.7 million in the year under review, up from a loss of Rs. 2.7 million the previous year. With other income of Rs. 2.7 million (Rs. 0.9 million the previous year), the pre-tax profit was Rs. 66.4 million compared to a loss of Rs. 1.8 million a year earlier. The after tax result was a profit of Rs. 42.6 million, up from Rs. 2.1 million the previous year during which there was a tax write back of Rs. 3.9 million. |
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Despite an improved turnover and lower interest, the Ceylon Glass Company Ltd. has posted a 47% drop profits during the year ended March 31, 1998, according to unaudited results now in shareholders hands. Turnover during the year under review was up to Rs. 692.2 million from the previous year's Rs. 638.7 million. The operating profit was Rs. 73.1 million, down from Rs. 108.6 million a year earlier. With other income of Rs. 3.3 million ( Rs. 5.5 million the previous year), the before interest profit was Rs. 76.4 million compared to Rs. 114.1 million in 1996/97. There had been a slight drop in interest payable at Rs. 41.7 million from Rs. 48.9 million the previous year leaving a pre-tax profit of Rs. 34.7 million, down from the previous year's Rs. 65.2 million. The company was not liable to taxation in either of these two years. Ceylon Glass has an issued capital of Rs. 277.1 million. |
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