Sri Lanka Newspapers Tuesday 24/04/2012

John Keells sets new records at tea auctions

John Keells PLC, a leading tea broking company in the country, was successful in obtaining several all time record prices at the Colombo Tea Auctions during the period March to April 2012.

Galpaditenne tea factory, the largest orthodox tea producer in the world, established an all time record price of Rs.530.00 for a PD grade along with Ceciliyan tea factory, the second largest single tea factory in the country. Both factories are well equipped and manufacture quality orthodox and CTC teas.

Nawalakanda tea factory, situated in Kahawatte and famous for Pekoe grades, established an all time record price of Rs.800.00 on 21st March 2012. This was bought by M/s U K Beverages and was subsequently bettered with a price of Rs.810.00 on 28th March 2012 for a Pekoe grade bought by M/s Empire teas.

Avissawella tea factory, marketed under Sithaka, established an all time record price of Rs.740.00 for the OP 1 grade on 3rd April 2012. This was bought by Jafferjee Brothers surpassing previous record of Rs.700.00.

The famous CTC factory in Sri Lanka, Hingalgoda tea factory which comes under the purview of TSHF PLC, established a record price of Rs.575.00 for the PD grade on 3rd April 2012.

Kenilworth tea factory situated in Ginigathena and managed by Watawala Plantations PLC, established two all time record prices of Rs.710.00 for the BOP grade on 14th March 2012 and Rs.750.00 for the BOP SP grade on 22nd March 2012.

"All these achievements were made possible due to the commitment, hard work and dedication of the John Keells PLC management, the company said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50214

Indices closed in the red on Monday on thin volumes.

The All Share Price Index fell 0.04 percent down 2.07 points to close at 5,455.06 while the Milanka Price Index of more liquid stocks fell 0.36 percent, down 17.78 points to close at 4,905.79.

Turnover reached Rs. 247 million on a volume of almost 25.8 million shares.

Forty four counters closed in positive territory against 139 counters that closed in the red.

The Colombo Stock Exchange has fallen 10.20 percent so far this year.

The net foreign inflow yesterday amounted to Rs. 39.68 million.

The highest contributor to turnover was Commercial Bank with 231,782 shares changing hands during the day, the counter gained 0.96 percent to close at Rs. 105.

JKH closed flat at 206 after 96,418 shares were traded.

Colombo Fort Land and Building fell 0.59 percent to Rs. 33.50 with 343,695 shares changing hands.

Nestle Lanka yesterday announced a final dividend of Rs. 47.50 per share.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50271

*No backtracking interest rate, exchange rate policy:

With interest rates and the exchange rate continuing to come under pressure, a think tank has warned authorities to learn from its mistakes and resist the temptation to intervene.

"Last week saw both the exchange and interest rates come under some pressure, despite the courageous reforms introduced by the Authorities in early February 2012. It is important, however, to learn from the policy mistakes of the recent past and to resist imminent pressure to manipulate these two key economic prices," the Pathfinder Foundation said in a statement yesterday.

"The Rupee closed at USD/LKR 130.20 at the end of last week. The pressure on the currency was expected to ease after the New Year. However, there was no sign of this as yet. In addition, the Central Bank has announced that it will stop supplying dollars for oil imports from May 2012 as part of its efforts to build up its depleted foreign reserves. This will inevitably exert further pressure on the value of the Rupee.

"Last week also saw a continuation of the rise of market-determined interest rates. The Central Bank has raised the Repurchase and Reverse Repurchase Rates by 50 and 125 basis points (bps) respectively. However, these actions are trailing well behind the markets. Treasury Bill rates have increased by over 400 bps, since August 2011. Last week’s Treasury Bill Auction (18/4/2012) saw yields rise across all maturities.

"The simultaneous pressure on the exchange and interest rates indicates that the adjustment necessary to stabilise the economy (i.e. address the sharp deterioration in the external position) is not complete as yet.

"The Pathfinder Foundation has argued that the challenge for the Authorities is to use all the available macroeconomic instruments to achieve the most growth/employment oriented stabilisation trajectory while containing the adverse effects on the poor and vulnerable.

"The policy stance adopted during August 2011 – February 2012 clearly demonstrated that attempts to resist market pressures are extremely costly. The attempt to defend the misaligned policies resulted in $3.6 billion being spent on propping up the Rupee and a hemorrhaging of a quarter of the country’s foreign reserves, much of it borrowed from abroad on commercial terms.

"The following lessons should be drawn from the recent policy mistakes.

"A very high price has to be paid in terms of the deterioration in the external finances; the foregoing of growth and employment; and the increase in the burden on the people, if economic policies seek to defy market forces.

"No one can hold down interest rates and support the value of the Rupee at the same time when there are imbalances in the economy. The less the exchange rate is allowed to adjust towards its market-determined value, the higher the interest rates will have to be allowed to move and vice versa.

"The failure to respond to global trends in a timely manner (e.g. an increase in the oil price) inevitably results in more painful action further down the line.

"In conclusion, it is important that stabilization policies are allowed to run their course. Failure to do so will increase the depth and duration of the economic downturn. It is important that the Authorities abide by the policy commitments that they have made in the recent past. These policy measures should be supplemented by a new package of reforms that increases the competitiveness of the economy and strengthens its growth framework," the Pathfinder Foundation said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50272

*8 year tier II funding from DEG Germany

HNB PLC yesterday entered in to an agreement with the German Development Finance Institution, DEG to raise USD 25 million through an eight year subordinated loan which forms part of tier II capital of the Bank. The funds raised would be utilised to finance the growth in small and medium enterprises which is one of the most important sectors supporting the post conflict growth in Sri Lanka, the bank said in a statement.

The loan agreement was signed in Colombo by Dr. Ranee Jayamaha, Chairperson and Rajendra Theagarajah, Managing Director/CEO of HNB and Dr. Hubertus Pleister, Director Asia at DEG, and Matthias Goulnik, Vice President Asia at DEG. With the signing of the agreement, the total capital and long term debt raised by HNB during the past 10 months surpasses Rs. 21.5 billion.

At the signing ceremony, Dr Ranee Jayamaha said, "we are delighted to partner with DEG in this all important agreement to raise long term tier II capital for the future growth of the Bank. The funds raised from DEG will not only boost the loanable funds available to HNB but also form part of a solid foundation in fostering the medium to long term growth of the Bank. This demonstrates the confidence the foreign investor community has placed on HNB as the Bank has been successful in raising foreign funds totalling to USD 75 million within a period of 1 month in 2012"

Rajendra Theagarajah stated that "This transaction is unique, as HNB is one of the very first banks to raise tier II capital, denominated in US dollars with a long term tenure of 8 years and clearly demonstrates HNB’s ability to raise long term funds from a well reputed overseas source at a highly attractive rate of interest and is no doubt a testament to the strong and stable growth recorded by the Bank in the recent years."

Dr. Pleister said, "With our commitment, we will strengthen Hatton National Bank PLC thereby enabling it to further expand its financial offer. At the same time, we are fostering the financial sector in Sri Lanka, facilitating the access to long-term investment capital especially for small and medium-sized enterprises. These enterprises are a major engine behind economic growth, particularly in developing countries. This is why the promotion of these enterprises is a special concern for DEG."

DEG, a subsidiary of Germany’s KfW, is one of the largest European development finance institutions for long-term project and company financing. For 50 years, DEG has been financing and structuring the investments of private companies in developing and emerging economies.

DEG invests in profitable projects that contribute to sustainable development in all sectors of the economy, from agriculture to infrastructure and manufacturing to services. It also focuses on investments in the financial sector in order to facilitate reliable access to capital locally. DEG’s aim is to establish and expand private enterprise structures in developing and transition countries, and thus create the basis for sustainable growth and a lasting improvement in the living conditions of the local population.

HNB is a premier private sector bank in Sri Lanka with a history which traces its origins as far back as 1888. Over the past years, Bank has been recognised by prestigous international and local bodies for excellence in all disciplines including banking, human resources management, corporate governance and tranparency. In 2012 HNB was recognised as the "Best Retail Bank in Sri Lanka" by the Asian Banker for the fifth consecutive year. HNB also became the first Sri Lankan bank to obtain an international credit rating from Moody’s Investors Services.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50274

Reuters: The rupee closed one per cent weaker at near an all-time low on Monday on importer dollar demand, shrugging off the Central Bank’s expectations of $ 574 million inflows within a month.

The rupee ended at 131.40/60 against the dollar, just firmer than the record low of 131.60 set on 19 March, and weaker than Friday’s close of 130.20/30. The lowest intraday trade was done at 130.50.

“Everybody will wait proper inflows coming into the market as rupee depreciation pressure is still there,” a currency dealer said on condition of anonymity.

The Central Bank said on Friday there was no need to intervene in the market as the country would see $ 574 million of inflows within a month.

But many dealers said the market would react only when the inflows come in and they believed the currency warranted further depreciation.

The currency has depreciated 13.1 per cent since the Central Bank stopped defending it on 9 February.

Sri Lanka’s stock market closed slightly weaker with a 0.04 per cent, or 2.07 points, fall to 5,455.06 as investors were waiting for direction amid uncertainty over the rupee’s depreciation, rising interest rates, slowing economic growth and corporate earnings.

A suspension of a 10 per cent price band on share-price movements failed to boost sentiment.

The day’s turnover was Rs. 246 million ($ 1.89 million), well below this year’s daily average of Rs. 1.31 billion.

The market, however, saw a net foreign inflow of Rs. 39.7 million, extending the net foreign buying to Rs. 21.3 billion in 2012.

The Colombo Bourse is one of the worst performing Asian markets this year, losing 10.2 per cent.
http://www.ft.lk/2012/04/24/rupee-sinks-to-near-record-low/

Reuters: Swiss food group Nestlé is to buy US drugmaker Pfizer’s infant nutrition business for $ 11.85 billion, beating out French rival Danone in the battle to gain preeminence in the lucrative baby food market.

Nestlé, the world’s biggest food company, was already seen as a favoured bidder due largely to its deep pockets, and is paying for the acquisition in cash.

The fight for the unit had intensified last week, with the price escalating sharply from bids around $ 10 billion after Danone was reported to have raised its offer on Friday.

“The deal makes strategic sense, it really was Nestlé’s deal to lose as it very much wanted to add to its Asian business and boost growth and margins,” said Kepler analyst Jon Cox.

“The price being paid seems quite high, by my calculations it’s at 22 times core earnings, almost as high as Danone’s infamous 2007 acquisition of Numico.”

Danone paid 12.3 billion euros in 2007 for Dutch food group Numico, at the time Europe’s largest baby food producer, paying a similar multiple, a price many analysts said was too high.

This acquisition, which is subject to regulatory approval, is expected to close in mid 2013 and will help Nestlé extend its lead in the infant formula market.

The Pfizer business with its SMA Gold brand ranks as world number five in the infant milk formula market – the world’s fastest growing packaged food category – after Nestlé, Mead Johnson, Danone and Abbott Laboratories.

The Vevey-based firm, which was founded by pioneering the development of baby formula, expects the acquisition will generate sales of $ 2.4 billion this year and boost margins, thanks to its large exposure to fast-growing emerging markets.

“Its strong brands and product portfolio, its talented people dedicated to the success of its business, together with its geographic presence – 85 per cent of its sales are in emerging markets – will complement our existing infant nutrition business perfectly,” Nestlé Chief Executive Paul Bulcke said on Monday.

Pfizer put its infant nutrition and animal health businesses up for sale last July as it looks to focus on its core pharmaceuticals business.
http://www.ft.lk/2012/04/24/nestle-to-buy-pfizer-baby-food-unit-for-12-b/

Mackwoods Energy, a leading provider of power solutions to the telecommunications sector, is positioned to play a dominant role in this sector due to its high reputation for process management, quality ,reliability , and 24 hour island wide service network, the company said in a statement.

"Critical uninterrupted power in the Telecommunications Sector is a hallmark of a committed network operator providing the best to its customers . Sri Lanka has a well established telecommunications infrastructure, compared to most other countries in the South Asian region. However, in terms of geographical network coverage, there exists much scope to expand networks into rural areas and particularly the newly liberated north and east regions. Further, island wide network coverage has become a critical success factor for Sri Lankan telecommunications service providers. Therefore, the operators who do not have adequate coverage are now expanding their transmission networks in order to cater to the demand of the consumers and remain competitive amongst their peers.

"Mackwoods Energy as a key infrastructure outsource partner of Airtel was instrumental in its rollout launch in 2008 and played a critical role in powering 153 towers within 45 days and continued to be involved in its expansion activities numbering 588 towers . Mackwoods Energy has also successfully introduced its power solutions to Dialog Axiata Plc and is currently instrumental in providing solutions for its expansions and roll outs in the north and eastern provinces in Sri Lanka. Mackwoods power solutions will mean low capex and opex costs for telecom network operators and less downtime leading to telecom operators being able to effectively compete in the market place and improve their own efficiencies, and invest further in expansions. Mackwoods Energy also has commenced providing solutions to other telecommunications operators such Huawei, Hutch, Suntel and Sri Lanka telecom, whilst also providing solutions to Dhiraagu Telecommunications Maldives .

"Mackwoods Energy , as a power solutions provider has undertaken many assignments with a firm commitment to reach excellence in all spheres of activity such as Power Generator and Diesel engine supply and providing solutions for Electrical Engineering, Telecommunications Engineering , Marine Engineering including installation and commissioning. Its reputation has been built on successful completion of key projects in a number of industries - plantation, telecommunications, leisure and travel, education, defence , condominium and construction, are critical to the Sri Lankan economy’s steady post-war recovery. The company today has emerged as a leading supplier of power solutions to industry by offering a 24 hour service through out the year Island wide and has over 4050 installations . Its pursuance of high standards of process quality is reflected in its successful completion of many projects in Sri Lanka and Overseas , and is in receipt of the prestigious ISO 9001:2008 and ISO 14001:2004 by SGS UK.

"Mackwoods Energy’s is a member of the Mackwoods Group .Established in 1841 , Mackwoods has the distinction of being the second oldest Mercantile Company in Sri Lanka and is a conglomerate of several companies engaged in Plantations, Agri Business, Information Technology, Healthcare, Industry, Manufacturing, Hotels, Tourism , Stock Broking, Financial Services, Real Estate, and ICT. With over 170 years of experience in business, Mackwoods is synonymous with integrity, stability and diversity both locally and internationally . Mackwoods Energy’s recent IPO for Rs 350 million was fully subscribed granting an opportunity to the public to participate in empowering the Nation."
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50239