W. M. Mendis & Company Limited has reported 7.7% increase of gross turnover from Rs.176.4 m. to Rs.190 m. for the 3 months ended 30th June 1996, as against the same period in the previous year according to provisional accounts.
The company's net profit with zero tax provision was Rs. 2.6 m. compared to the previous year's loss of Rs. 9.5 m. However, shareholders' funds decreased from Rs.314.4 m. to Rs.300.4 m. during the period.
During the period under review the company paid Rs.163.8 m. as government levies out of the gross turnover Rs.190 m.
Asia Capital's group turnover for the quarter ended 30th June, 1996 declined by 92.5% from Rs.38.9 to Rs.2.9 m. This has led to an operating loss of Rs.11.2 m. However, with the other income earned, the company was able to report a pre tax profit of Rs.14.3 m. reflecting 39.4% drop over the previous year's figure.
Post tax profits also dropped by 40% from Rs.13.6 m. to Rs. 8.1 m. during the period under review according to the provisional accounts.
Lanka Walltiles Limited incurred a loss of Rs.3.5 m. during the six months ended 30th June, 1996 as against the previous year's profit of Rs.59.8 m. according to unaudited accounts.
The company's turnover increased marginally by 5.7% from Rs.400.00 m. to Rs.423.3 m.
Shareholders' funds as at 30th June shows 2.6% increase over the previous period.
Ceylinco Insurance Company Ltd., recorded Rs. 876.5 m. turnover (including life premium) for the six months ended 30th June, 1996 according to the provisional accounts. It shows 18.2% increase over the turnover reported for the same period in the previous year.
Profit for the period with zero tax provision was up by 10% from Rs. 21.3 m. to Rs. 23.5 m.
Just when the dust was setting on the Puttalam Cement deal, yet another venture has activated Colombo's business circles.
Lobbying is on at a furious pace to have the opportunity to explore the country's phosphate deposits, ever since it was made known that initial overtures to a particular company were in no way final.
Several 'giants' in the industry want a slice of the cake and even embassies are supporting some claims, we hear....
Is the television network that is supposed to be independent being privatised or not?
First, the government called for bids for a substantial stake of the company. Next the bachelor boy who handles the issue announced there were second thoughts.
Those who placed bids are a puzzled lot. So, will someone please tell them what the final decision is?
The joint effort by two major state institutions to bid for a plantation company took many by surprise.
Foreign analysts however were critical saying that the government was buying back its own assets.
But, more such joint venture investment companies are in the offing, we hear....
The Sunday Times Celltel Business Club meeting was held last week at the Colombo Hilton, with special proposals to all club members - the Business Club meetings are going to take a new turn and a committee consisting of club members is to be appointed to take over responsibility of organizing the meetings.
It was agreed that this would bring about more interaction amongst club members, who will be actively involved in organizing up-to- date programmes.
The main item on the agenda was an enlightening discussion on customer care by Celltel Senior Manager Chrisso Handy. Being a vital component in any service oriented organisation, customer care is the core of any business, Mr. Handy said. Though it is so often spoken of, there is very little development in this sector, in our country he said.
Talking of his experience of attending to business in Colombo, Mr. Handy pointed out the frustrations when walking into various institutions and being treated badly by those who were ignorant about customer care. Putting oneself in the customer's shoes will give a better understanding as to how various situations should be handled. Because, according to Mr. Handy, "customer care is 20 percent commonsense." He stressed that it is commonsense to be polite to any customer and urged the members to always be ready with a smile.
According to him customers feel let down for several reasons, such as turning them away, being ignorant of customer needs, poor timing, poor staff communication etc. Mr. Handy observed that it is always better not to do one thing 100 percent but to do 100 things 10 percent better every year, stressing that an establishment should not concentrate on improving one aspect, but on gradually improving all aspects on a long term basis so that there may be a steady growth. It was agreed to elect the committee members at the following meeting; Five committee members will be elected together with a President, Vice President and Secretary. All members who were absent, be sure to be there at the next meeting.
The western countries are rich not because they have more resources, but because they have a high level of productivity, Minister C.V. Gooneratne said at the NIBM awards ceremony.
"The world is fast becoming borderless and it is turning itself into a global village where the challenges are daunting but the opportunities are limitless. This means a great deal to countries such as Sri Lanka which have relatively small domestic markets", Mr. Gooneratne said.
It was observed that after the second world war, Japan was topping the list in terms of standards of living, while Sri Lanka was second. With foreign exchange flowing into the country and the three main exports of Tea, Rubber and Coconut, at its height, Sri Lanka was envied by countries such as Malaysia, Korea and Taiwan. Today, Sri Lanka can barely manage to maintain such a standard in South Asia.
"Skills development and the development of human capital, become an extremely significant part of the training package", NIBM Chairman Prof. W.D. Lakshman said.
He stressed the importance of human resources for the economic and social development of a country, like Sri Lanka.
Pointing out at Sri Lanka's low-income capacity and high literacy rate and life expectancy, Prof. Lakshman said, "The literacy rate which is as high as 85 percent has brought about many changes in the country. But when it comes to functional literacy, the achievements are not that great", Prof. Lakshman said.
He said in this context, the NIBM has achieved a great deal by improving both the theoretical and functional abilities of individuals.
Being the premier training institute in the country, the National Institute of Business Management has come a long way in developing human resources for the public and private sectors. Thus, contributing in numerous ways to enhance productivity in Sri Lanka.
At present there are several diploma courses which include, Diploma in Business Management, Diploma in Computer Systems Design etc.
In addition, NIBM has carried out many applied management research studies with both locals as well as foreign sponsorship and expertise.
Bank of Ceylon has provided on-line facilities to Grand Hotel, Nuwara Eliya, with an electronic data capture machine in collaboration with Sampath Bank and American Express Bank.
The facility enables Grand Hotel to link with Bank of Ceylon, Ceybank Visa Card Centre and to accept credit cards such as Visa Credit Cards, American Express and Master Cards, using this sophisticated customer friendly machine.
The International Monetary Fund expects to begin negotiations for an Enhanced Structural Adjustment Facility with the Sri Lankan government early next year, an IMF official revealed.
"We will probably start active discussions after the budget," IMF Representative in Sri Lanka Thomas Morrison said.
Sri Lanka has not received IMF assistance since the draw down of the last, three-year ESAF facility. The country has had an overall balance of payments surplus continuously since 1989, except for last year. Analysts also expect a balance of payment deficit in 1996.
"Sri Lanka is not in desperate need of assistance," he stressed. However the it would be useful to have an ESAF to strengthen the overall framework he said.
The IMF forecasts a GDP growth rate of 3.5 to 4 per cent in 1996. The drought is estimated to take off at least one percentage point off the growth rate.
Last week the IMF released its annual report for the financial year ended April 1996.
Total new loans disbursed during the years was at an all-time high of US $ 26 b, up from the previous high of US $ 22 b in 1995. The large volume of loans was mainly due to a US $ 120 b assistance package to Russia and large tranche of funds on account of the Mexican crises. Though the crises had occurred in late 1994, its effects had spilled over to the next years, Mr. Morrison said.
Liquid funds available for disbursements with IMF had dropped sharply to 90 per cent of total liabilities at the end of April 1996 from 126 per cent the year before.
The IMF had therefore decided to boost its financial resources. The IMF had resources worth US $ 145 b and additional agreements to borrow US $ 17 b from the 11 industrial nations and Saudi Arabia in times of need.
The Mexican crises had also prompted the Fund to increase its surveillance so that information would be available in a more timely manner.
A new emergency assistance process had also been developed to cope with major crises in countries which had a systemic importance in the world financial network, such as Mexico.. The new mechanism had been born out of the IMF's experience during the Mexican crises.
Another new fund was set up to protect currencies that are subject to speculative attacks. In addition a third fund had been set up to help countries emerging out of war, such as Bosnia or even Sri Lanka.
Two new countries, Bosnia-Hercegovina and Brunei had joined the fund last year boosting total membership to 181.
Is the worst over? That is the question in the minds of most businessmen. They would like a clear answer. Yet the complexity of the situation hardly offers an easy answer to the question. The overall political context, the unpredictable security situation, the worsening public finances, the improving power situation, the psychology of the business community and the attitude of foreign investors are all factors bearing on the economy' s performance.
If we take as our starting point the performance of our quoted companies, the results of which are published quarterly, then it is clear that at the end of June most quoted companies had performed badly. The power cuts prevailing during this period, lesser demand for many imported and domestically produced goods and high interest rates are among the factors attributed for the poor performance. In the third quarter of this year the power situation improved and this may enhance industrial performance. Interest rates, however, are not likely to come down and most companies would have to bear a heavy burden on interest costs which may wipe out the benefits of any increases in turn-over. In addition, particular industries such as tourism with a drastic decline in tourist arrivals, textile industries affected by recent government policies and export garment firms facing severe competition abroad, are adversely affected by conditions which are not likely to improve immediately.
The high interest rates are indeed at the root of many a company's poor performance. With the increasing public debt and financing of the war, there is little prospect of a decline in treasury bill rates which dominate our interest rate structure. As long as the yields on treasury bill investments are high, banks would be able to charge high on lending rates to their customers. Treasury bill rates in turn would remain high as long as the government has to borrow heavily. The problem would be accentuated if business turnover is also affected and thereby government revenues. Some drastic re thinking of fiscal policy coupled with monetary initiatives would be essential to reverse this situation. There does not appear to be any such discernible thinking on the horizon.
All is however not lost. In an otherwise gloomy situation the tea industry is faring well. Not only has production of tea increased further from last year's peak production, tea prices are holding good. The high tea prices imply good earnings from our tea exports. Rubber prices too are holding high though rubber production has declined marginally and we are unable to exploit the improved prices to the fullest. Despite the unfavorable current developments in the economy, some investors appear to have confidence in Sri Lanka's long-term growth. There are substantial investments in infrastructure and in industries with an export growth potential. Such investors find Sri Lanka a hospitable climate and are not deterred by recent developments. Export industries have been faring significantly better than local industries in recent years. This year's export performance has however been much less: a growth of only about 4 per cent compared to a 12 per cent growth last year. But since some of these could be attributed to the power cuts, it is likely that export growth may resume an accelerated path in the next six months. We can only hope that the security situation would be stable enough to once again encourage tourists to travel to the country.
The government appears to have accepted that economic conditions have deteriorated and attempted to make some feeble moves. Whether they would bear fruit is another question. But the recognition that there is a fundamental flaw in our economy's performance is itself a positive factor which may hold out the prospect of a more pro active economic role for the government.
All these mean that we can live in hope rather than expectation but any sense of despair that the economy would plunge further down could itself generate the influences which would affect the economy's performance adversely. A more candid assessment of the situation by the government, some pro active measures and a more positive approach by the business community could indeed help the situation. Can we expect these?
With ASPI hovering around 560 points and most of the annual reports for the second quarter being published, adverse economic/political conditions have eroded profits as well as turnover foreign investment except in certain large parcels in selected stocks like DFCC, Docks, Seylan Bank etc. appear to be on the sideline. Local retail and HNI high network individuals were keenly picking speculative stocks like United Motors and Tea Small holders. Profit taking was also evident in these speculative stocks, which seems to have a market of their own with variations of 10-20 %.
The week saw the offer for sale of Balangoda plantations being concluded. The other offer - the issue of Uda Pussallawa Plantations will be concluded on October 9. Associated Hotels was fully subscribed this week with 34 applications being received.
A bill empowering the President to re-vest ailing privatized public enterprises due to mismanagement was presented in Parliament last week.
This bill could be interpreted by prospective investors as a re-nationalization scheme at a time of privatization.
Treasury bill rates at present are 17 % for 12 months yields. With long term interest rates expected to increase, institutional investors will be on the sidelines when it comes to equity investment in the Colombo Share Market.
Balance of payment deficit caused by a decrease in the value of the rupee (depreciation or devaluation) appears to be on the cards. The declining value of rupee will result in the erosion of dollar returns and require higher discounts for inestments. Thus overseas investors would wish to invest after a depreciation/devaluation has taken place.
Due to very attractive low prices in the stock market long term investors (2 years) could pick blue- chips with very low P/E multiples and low price to book ratios. Recommended for long-term investments (2 years) are, Tea Small holders, Seylan, Commercial Bank and Grain Elevators.
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