Financial Times

James Finlay to increase green tea exports
James Finlay (Colombo) Ltd plans to increase green tea production following the success of a combined industry marketing effort to build an image for the product in overseas markets.

“We plan to increase capacity by about 25 percent,” chairman Dickie Juriansz said. “We’ve been successful, along with other players, in establishing Sri Lankan green tea in the world market. A few years ago it was unknown.”

The company has a green tea plant in Haldumulla with a capacity of 500,000 kg.
Demand for green tea is on the rise in the beverage market, partly propelled by increasing awareness of its health benefits, and it commands premium prices.
Juriansz described it as an elite product targeted at niche markets.

James Finlay is one of the most integrated tea companies in the island with its own plantations and warehousing, as well as doing blending, packaging and value addition for export. It is also involved in insurance brokering, airlines, general sales agency and industrial and agro-chemicals.

However, a poor performance by the plantations sector dragged down group operating profits by 39 percent to Rs. 126 million in the first half ended 30 June 2003 despite what Juriansz called a “robust performance” in the non-tea sector. Group net profit before tax fell by half to Rs. 60 million compared with the same 2002 period. Juriansz said he expects better results in the second half, barring unforeseen events.

Both the plantation firms under the Finlay group, Hapugastenne and Udapussellawa, incurred losses in the first half, largely owing to the disruption caused by the Iraq war and the cost of last year’s wage hike. Although export volumes fell, the company’s strategy of increasing value added exports, where margins are higher, resulted in a 64 percent growth in pre-tax profit. About 75 percent of Finlay’s tea exports are branded products.

Juriansz said the company was also focusing on making higher value teas such as flowery grades rather than producing the standards BOP varieties. The firm's parent, James Finlay and Company, Glasgow, which owns 75 percent of James Finlay (Colombo), recently increased its stakes in the plantation subsidiaries buying 5.2 million shares or an 11.36 percent stake in Hapugastenna Plantations for Rs. 14.75 each and 2.09 million shares or an 10.8 percent stake in Udapussellawa Plantations at Rs. 10.25 each, held by the Treasury.

The purchases were by James Finlay Glasgow nominees Jaycey Trust Services Ltd.
James Finlay exports over six million kilos of tea annually and is the fourth largest exporter of tea bags.

Hemas aims to be among top five Lankan firms
Hemas is aiming to be among the top five companies in Sri Lanka, promised Husein Esufally, Chief Executive Officer, Hemas Holdings Ltd, at last week's launch of its Initial Public Offering (IPO).

The 600-million rupee issue opens on September 18. The company's consolidated revenues and profit after tax for the year ended 31st March 2003 amounted to Rs, 5.3 billion and Rs, 401 million respectively, while shareholders' funds as at that date stood at Rs. 1.7 billion.

The share issue is lead managed by the DFCC Bank and co-managed by the Hatton National Bank and the issue of new shares, amounting to Rs. 400 million, is fully underwritten by DFCC and HNB. Esufally said that the family company was established in 1948 by Sheikh Hasannally Esufally, and today is one of the leading conglomerates in Sri Lanka. Hemas Holdings Ltd is the holding company of the group which comprises 20 active subsidiaries and three associate companies.

He said that when Hemas penetrated into personal care business it was dominated by multinationals and had to face many obstacles. They went into the market with several challenges but today have a market share of 31 percent.

In the transport section, the company deals with airline representation, travel agency services, freight forwarding and logistics. It represents Emirates Airlines, Malaysia Airlines and LTU Airways and off-line carriers including British Midland Airlines, Island Aviation and Druk Air.

In the leisure sector, Hemas is engaged in destination management services operation of travel centres and ownership and management of hotels. The group effectively controls Serendib Hotels Ltd, Sigiriya, Stafford Hotels and Dolphin Hotel.
In healthcare, Hemas is the largest private sector distributor of pharmaceuticals with a market share of 15 percent. (QP)

Private sector borrowing picks up gradually
The Central Bank has reported a gradual pick up in lending to the private sector amid falling interest rates and reduced borrowing by the government and state enterprises.

The Central Bank said in its monthly monetary policy statement that it believes its policy rates are at "appropriate levels" at present, given current economic developments and prospects.

The point-to-point growth in credit to the private sector increased to 14 percent in July, up from 13.4 percent in June 2003 and 7.6 percent in July 2002. "Credit expansion to the private sector was mainly due to an increase in credit extended for export and import finance and industrial, housing and consumption purposes," it said.

Government borrowing from the banking sector fell by around Rs. 18 billion during the first seven months while credit to public corporations decreased by around Rs. 7 billion.

Monetary growth during January - July 2003 has averaged around 13 percent, which is broadly in line with the projections for 2003, the bank said. The receipt of foreign loans and improved cash management by the General Treasury enabled the government to reduce its liabilities to the banking sector.

The improvements in domestic supply conditions, reduced pressure from import prices, and the cautious monetary policy stance, which prevented the emergence of demand pull inflation, have been instrumental in further moderating inflation in 2003.
With exports on the rise, increasing faster than imports, the trade gap has narrowed.
Cumulative exports for 2003 grew 18 percent in US dollar terms in the first six months of 2003, while cumulative imports grew by seven percent, resulting in a narrowing of the trade deficit to $ 700 million in the first half of 2003 from $ 863 million in the same 2002 period.

"Increased inflows in the services account, particularly from tourism and port services, increased remittances and capital inflows in the form of portfolio inflows, investments and loans have supported the reduction in the trade deficit, to lead to a substantial surplus in the overall balance of payments," the bank said.

This enabled the bank to buy $ 257 million from the market in the first eight months of 2003. The country's gross official reserves have increased to around $ 1.9 billion by end July, equivalent to around 3.7 months of imports.

Total gross international reserves increased to $ 2.8 billion, which is equivalent to about 5.3 months of imports, at end July 2003. Along with the increase in inflows, the foreign exchange market has remained stable. "Despite the slight nominal appreciation of the rupee against the US dollar internationally, Sri Lanka's external competitiveness has improved, partly due to the decrease in inflation and partly due to the depreciation of the rupee against other major currencies," the bank said.

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