* 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.

LBO

* 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.

-LBO

* 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.

LBO

* Srilankan Stock Market Watch - Trading Tuesday - 01 Feb, 2011

Monday Sri Lankan shares closed up 0.22-pct.



The All Share Price Index closed at 7,190.77 up 0.22percent (15.9 points) while the Milanka Price Index of more liquid stocks closed at 7,121.28, down -0.18 percent (12.99 points).

Turnover was 3.2 billion rupees, according to provisional Colombo Stock Exchange statistics.

Laugfs Gas Plc (LGL) sustained its position on top as the top contributor to the turnover with an amount of Rs.433.2mn. Furthermore LGL turned out to be most actively traded counter during the day. In addition Colombo Fort Land and Building Company Plc (Rs.385.6mn) and Citrus Leisure Plc (Rs. 244.2mn) made notable contribution to the daily turnover.

Diversified sector, Power and Energy sector and Manufacturing sector were the mostly contributed to sectors to the daily turnover.

Meanwhile Singer Finance Plc, Ceylinco Securities & Financial Services Plc and Ceylon Grain Elevators Plc were the aggressively traded counters during the da


All Share Price Index Movements - 01.02.11

Milanka Price Index Movements - 01.02.11

There was a net foreign inflow of 21.8 million rupees as foreigners bought 191.2 million rupees worth of shares and sold 169.4 million rupees.

* Sri Lanka inflation 6.8-pct in January

Sri Lanka's inflation in January 2011 rose 6.8 percent from a year ago after rising 6.9 percent in December 2010, the central bank said.

Prices rose 1.3 percent during January 2011 with the index rising 231.2 in the month, it said in a statement.

The seasonally adjusted, moving average of the Colombo Consumer Price Index also rose to six percent in January from a year ago, and up from 5.9 percent in December 2010.

The moving average is a lagging indicator averaged over 24 months.

Annual average inflation was 3.4 percent in 2009.

* Sri Lanka stock website shuts after regulator warning

A Sri Lanka stock investment website has closed after warnings against misleading investors by the capital markets regulator, whose officials said they were cracking down on such sites.

An official at the Securities and Exchange Commission said they warned the people operating the website, saying misleading advice that influence share prices could violate SEC regulations.

The operator of the site, investnow.lk, decided to close last week after the warning by the regulator.

A notice posted on the website said it was "temporarily suspending" the forum in order to "rework" its strategy and create a "professional entity that will continue to help investors navigate the great depths of the market and act to be a credible guide with the help of you all, the community."

It said it would act in a manner that "best serves the community . . . and be free from manipulative control through education and creating awareness."

The site offered to refund members for any services paid for that are still valid.

The SEC official said they were also monitoring other websites that offer advice on investing in the stock market which has been on a bull run since the island's 30-year ethnic war ended in 2009.

The SEC was also investigating stock brokers believed to be behind some of the websites that offer advice to investors, he said.

The Colombo bourse was Asia's second-best performing market last year