Wednesday, 2 February 2011

* Sri Lanka Haycarb hit by high charcoal costs, strong rupee

High charcoal prices and a stronger rupee have squeezed margins at Sri Lankan activated carbon manufacturer Haycarb, cutting December 2010 quarter net profit by 28 percent to 89 million rupees, a statement said.

Sales of coconut shell-based activated carbon in the period rose 37 percent to 1.6 billion rupees from a year ago while earnings per share fell to three rupees from 4.19 rupees.

" . . . net profit of Haycarb’s Sri Lankan operations for the third quarter reflected a decline of 17 percent over the corresponding quarter, principally as a result of higher charcoal prices and the appreciation of the local currency against the US Dollar," the statement said.

"Due to the acute shortage of charcoal locally, the company was compelled to import 55 percent of its total requirement."

Lower coconut production in the island has created a shortage of nuts sending prices shooting up to record highs in recent months.

Net profit for the nine months ending December 31, 2010 at Haycarb, a unit of the Hayleys conglomerate, was flat at 394 million rupees although sales rose 27 percent to 4.7 billion rupees.

"The continuing increase of charcoal purchase prices could not be passed on to customers, and exerted significant pressure on our bottom line," Haycarb managing director Rajitha Kariyawasan said.

"However, the strong performance of overseas subsidiaries, maximization of throughput and our focus on value added products enabled the company to mitigate this exposure to some extent."

The "significant appreciation" of local currencies in Indonesia and Thailand against the US dollar and an increase of furnace oil cost in Sri Lanka also contributed to a reduction in the gross margin of the group, he added.

There was "strong demand" for activated carbon and maximum factory capacity utilization in the nine months reviewed, the statement said.

Haycarb group has manufacturing plants in Sri Lanka, Thailand and Indonesia with marketing offices in the UK, Australia and USA.


* Sri Lanka Union Bank in IPO

The Colombo Stock Exchange has approved a public share offer by Sri Lanka's Union Bank to raise 375 million rupees by issuing 15 million ordinary shares at 25 rupees each, a statement said.

CSE has approved in principal the application for listing on the main board of the bourse.

The IPO opens on February 24 with the prospectus available on February 10.

In December 2010, a Union Bank rights issue of 10 million shares at 25 rupees each to existing shareholders was oversubscribed by four times.

The bank has said it plans to raise over 1.1 billion rupees through the rights issue, a private placement and a subsequent Initial Public Offering.

The fund raising will help the bank meet all Central Bank capital adequacy requirements until 2015.

The bank has 20 branches including 05 in the north of Sri Lanka and is expected to open up to 10 new branches in the coming months.


* Sri Lanka fabric maker Hayleys MGT Knitting Mills in Rs626mn December quarter loss

Sri Lankan fabric maker Hayleys MGT Knitting Mills made a loss of 626 million rupees (5.6 million US dollars) in the December 2010 quarter following provisioning after an audit inquiry into a fraud, a statement said.

The firm, a unit of the Hayleys conglomerate, said gross sales rose 13 percent to 13.3 million US dollars in the quarter from a year ago.

It had made a net profit of 197,422 dollars in the December quarter of the year before.

Fitch Ratings had placed Hayleys MGT Knitting Mills on 'Rating Watch Negative' in December after the fabric manufacturer warned of losses when an inquiry revealed discrepancies in inventory and accounts receivables.

The Hayleys MGT Knitting Mills stock exchange filing said a special audit verification had been done by B R De Silva , Chartered Accountants and S J M S Charted Accountants on trade receivables and inventories.

The probe had revealed "there were discrepancies between the value of physical balance of inventories and that of financial statements", it said.

"Net realizable value of certain categories of inventories could be lower than that of weighted average cost. Trade receivables were over stated as some credit notes due have not been recorded."

The company said the discrepancies forced it to make an additional provision of almost 1.2 million US dollars for trade receivables and of just over two million dollars for inventories.