islbsnss.htm

During the period 31 March to 30 September 1998, United Motors Lanka Ltd., and its subsidiaries reported a consolidated net turnover of Rs. 471.6 million, a decrease of 2.5% over the net turnover of Rs. 483.4 million achieved in the first half of 1997/1998. The Group Profit Before Tax of Rs. 78.6 million and Group Profit After Tax and Minority Interest of Rs. 52.4 million improved by 3.5% and 5.4% respectively over the results of the corresponding period of the previous year.

With the introduction of the ‘Montero’ jeep to the Mitsubishi range of vehicles early this year, vehicle sales during the first six months of 1998 improved marginally over the first half of 1997/98, although profitability was lower due to reduced margins. While the workshop recorded an improvement in turnover and profitability, spare part sales were marginally below the figures reported for the first half of 1997/1998.

Despite unfavourable market conditions, there were more tractor sales during the six month period than in the corresponding period of the last financial year. The Chinese-built EME1 7A model in particular, proved popular. Sales are likely to increase in the second half of 1998/1999, following a widening of the dealer network and further technical improvements introduced to the EME1 tractors.

UMLL subsidiary companies contributed Rs. 22.2 million to group turnover as against a turnover of Rs. 6.5 million recorded in 1997/98. This increase was mainly due to the incremental revenue from AUML (Autogas) Lid’s first LP gas filling station which commenced operations in April this year.

Construction work on the building complex at Orugodawatte which will house UMLL’s new vehical workshop, is nearing completion. The company is in the process of sourcing equipment for the workshop in order to provide Mitsubishi vehicle owners with modern facilities and a superior after sales service.

Despite increasing competition in the vehicle market and the adverse impact of the appreciating Japanese Yen, the Management is endeavouring to achieve an acceptable return to shareholders through enhanced operational efficiency and effective marketing strategies.

United Motors has an authorised share capital of Rs. 200 million and an issued and fully paid up share capital of Rs. 147.1 million. Fixed assets and Investments and current assets as per the audited accounts as at 31 March 1998 amounted to Rs. 316.2 million and Rs. 488.1 million respectively, while current liabilities stood at Rs. 287.6 million.

Mr. M. J. C. Amarasuriya Chairman, Mr. G. A. Hidelaratchi Managing Director/Chief Executive, Mr. I. S. Jayasinghe Director, Prof. J. W. Wickremesinghe Director, Mr. J. S. Mather Director, Mr. C. Wijenaike Director, Mr. K. Balendra Director, Mr. V. Lintotawela Director, Mr. A. Saruhashi Director.

A dull week at the Colombo bourse
Over the week to 18th December 1998 the, the ASPI lost 1.9 points WoW (-0.3%) WoW) to close at 555.4 points at the end of trading. The SPI also lost 15.9 points over the week (1.8% WoW) to close at 847.65 points. During the week, foreigners remained active in the market as net seller by Rs. 16.7m and contributing to 43.5% of the total turnover for the week.

Trade deficit rises in October
The trade deficit in October has risen by 78.3% YoY to US $63.3m. The cumulative figures for the ten months up to October however show an improvement of the deficit by 5.5% YoY as against our forecast of an improvement of 1.7% for the full year. Exports fell 10.8% in October but have risen by 3.7% for the ten months. Imports have fallen by 4.2% in October but cumulative figures still reflect a rise of 1.7% for the ten months. The rise in the trade deficit in October however reflects a rise from a relatively low base in October 97 when the deficit was only US $35.5m. An interesting aspect of this year’s trade data is the higher growth of garment exports for the ten months of 8.7% compared to growth in imports of textiles of 2.5% for the sector. This indicates an increased value addition in the sector or higher net foreign exchange earnings from Garments Exports. Thus though the rate of growth in garment exports has slowed the growth in net foreign exchange earned from Garments exports appears to be rising strongly.

Fortune for JKH
Fortune Magazine in its December issue has identified John Keells Holdings (JKH) among the top 10 Asian stocks. They site an excellent management team and strong fundamentals as the prime reason. We feel this is positive news for the company and that one could expect some short term buying pressure. The magazine has paid a lot of importance to companies with an excellent management reputation as many companies that were found wanting during the ASEAN crisis were lacking just that. We feel this is the key reason that the stock is trading in excess of a 100% premium to the market at present. However JKH has a 31% exposure to volatile commodity prices such as tea and rubber with its take in Kegalle, Maskeliya and Namunukula plantations. Through its holdings in the plantations, JKH now controls around 11% of the country’s tea production and 5% rubber production. With highest tea prices in history, contribution from plantations was the key to FY 3/98 earnings growth of 90% but has also resulted in a 31% earnings exposure to volatile commodity prices. We believe that the plantation sector is heading for a difficult trading environment in CY 98. The tea prices have already come off in the 2H of CY 8 as the country’s major tea buyer, CIS is going through severe economic crisis. Tea prices have continued to dip in the month of November. We now expect the contribution from the plantation sector to slow down to below 26% JKH bottom line in FY3/99. We are in the process of reviewing our forecasts.

Market valuations attractive
The market yield ratio is now at a historic low of 0.63x. With falling interest rates, we believe that equities will be increasingly attractive on fundamental grounds. Our recommendations include Colombo Dockyard, Lanka Lubricants, NDB, and Sampath Bank.

Phoenix College of Clothing Technology (PCCT) organised a seminar titled "Computer Aided Artworks for Fashion & Textile Design Industries" recently and was held at the Martin Trust Hall of the College.It was well patronized by the industry.

Delivering the welcome address Mr. R. U. Kuruppu, Managing Director of PCCT said that the future structure of the fashion & clothing industry will be different from what it is now. He said fashion and clothing is by history the most imaged based of the industries in the consumer goods sector. It has been said that in fashion and clothing, " the image is the message".

Mr.Kuruppu said that Lead Time in the US clothing pipeline was studied by Kurt Salmon Associates, a well known consultancy company, and established that it took an average of 66 weeks for a garment to pass through all the processes in the pipeline. The study showed that it took 31 weeks of time to distribute garments and sell over the counter in a shop to consumers. According to Mr.Kuruppu the study has shown that US apparel companies take 5 weeks throughput time after having received an order for the manufacture of garments and finally 30 weeks of time for upstream activities such as fabrics to pass through all the processes of fabric preparation and product development.The study has revealed that this unnecessarily long response time is costing the entire US textile/clothing/retail complex more than US $ 12.5 billion annually. Therefore, the US apparel industry has adopted methods to reduce the time in their apparel pipeline. Computer aided Artworks is one such method to reduce time in the value chain, said Mr.Kuruppu.

Prof. Lakdas Fernando, Head of the Department of Textile and Clothing Technology of the University of Moratuwa, giving the keynote address said that Sri Lankan industry will have to be more competitive in the future and reducing response time can be useful in that context. He said, " countries like Bangladesh have developed their organisational capabilities and thereby increased their output in number of folds in the recent past causing a threat to many developing industries. Prof. Fernando said that Computer aided design and marker making is no more a luxury but it is a necessity in today’s context. However, he was in the opinion that most companies do not use these equipment to its full capacity .

Ms. Deborah Matthys of SR Gent plc UK speaking on design studio concepts gave the key factors for a design studio; sources of inspiration; visits to local and foreign trade shows & fairs so that an insight can be gained into what the rest of the world is doing; subscribing to various magazines to follow the trends in both high and low fashion, and shopping trips to see what products have actually reached the stores and what is selling. She said that the designers task was once an arduous one but now with the arrival of modern technology, the designers’ dream has come true. Gone are the long hours of unavoidable repetitive tasks. She explained how one could be free to concentrate on experimenting with their creative skills when there is computer controlled equipment. Deborah Matthys ended up saying that lead time is reduced by using computer aided artworks and thereby making the producer and the customer far more competitive in the market place.

The final presentation was made by Ms. Thauseef Mahamood from Gerber Ltd., UK. She demonstrated a typical computer controlled artwork system and showed how useful it is. Her demonstration covered free hand sketching, copying an image and drawing over it, colouring a sketch, developing fabric designs of print and woven & knitted structures etc.

+ Exchange Rates

The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of December 22th, 1998 were as follows:

	Buying	Selling
100 US Dollars	Rs. 6690.87	Rs. 6826.03

The approximate middle exchange rates of following currencies calculated on the basis of cross rates quoted by Gulf International Bank, Bahrain as it appeared in Reuters Financial Information System on December 22, 1998 were as follows:

Saudi Arabia Riyal	Rs. 18.01
Bahrain Dinar	Rs. 179.28
Kuwait Dinar	Rs. 224.20
Qatar Riyal	Rs. 18.57
UAE Dirham	Rs. 18.41
Oman Riyal	Rs. 175.56

Average rates at which the following currencies were quoted by Commercial Banks in Colombo for Telegraphic Transfers at mid-day on December 22, 1998 were as follows:

	Buying	Selling
100 US Dollars	Rs. 6788.00	Rs.6827.00
100 Sterling Pounds	Rs. 11404.58	Rs. 11531.10
100 Deutsche Marks	Rs. 4046.80	Rs.4104.48
100 French Francs	Rs. 1204.77	Rs.1223.19
100 Japanese Yen	Rs.58.25	Rs. 59.29

Average Weighted Prime Lending Rate (AWRP) and Lowest Prime Rate (LPR)
The Average Weighted Prime Lending Rate (AWPR) during the week ended December 18th, 1998 was 14.7 per cent for all banks. The Lowest Prime Rate among banks during this week was 13.0 per cent.

Average Weighted Deposit Rate of Commercial Banks (AWDR)
The Average Weighted Deposit Rate (AWDR) of Commercial Banks for the month ended November 30th 1998 was 9.2 percent.

* Unit Trust Prices

National Equity Fund

Manager's Selling Price	Rs. 7.83 (per unit)
Managers Buying Price	Rs. 7.35 (per unit)

Namal Growth Fund

Manager's Selling Price	Rs. 9.16 (per unit)
Managers Buying Price	Rs. 8.57 (per unit)

Namal Income Fund

Manager's Selling Price	Rs. 10.57 (per unit)
Managers Buying Price	Rs. 10.45* (per unit)
	Rs. 10.56* (per unit)

* After deducting exit fees

Ceybank Unit Trust

Manager's Selling Price	Rs. 5.88 (per unit)
Managers Buying Price	Rs. 5.50 (per unit)

Ceybank Century Growth Fund

Manager's Selling Price	Rs. 8.33 (per unit)
Managers Buying Price	Rs. 8.16 (per unit)

Pyramid Unit Trust

Manager's Selling Price	Rs. 5.74 (per unit)
Managers Buying Price	Rs. 5.35 (per unit)

* Ex Dividend Price