ECONOMYNEXT – Sri Lanka’s rupee closed at 330.30/55 to the US dollar in the spot market on Thursday, from 329.50/75 the previous day, while bond yields closed steady to higher, dealers said.

A bond maturing on 15.12.2027 closed flat at 10.00/20 percent.

A bond maturing on 15.10.2028 closed at 10.40/60 percent, up from 10.40/50 percent.

A bond maturing on 15.12.2029 closed at 10.70/80 percent, down from 10.70/85 percent.

A bond maturing on 01.08.2030 closed at 11.15/20 percent, up from 10.97/11.05 percent.

A bond maturing on 01.02.2031 closed at 11.25/35 percent, up from 11.05/12 percent.

A bond maturing on 15.10.2034 closed at 11.95/12.00 percent, up from 11.80/85 percent. (Colombo/Sep24/2026)

Fitch Ratings – Colombo: Fitch Ratings has affirmed Ceat Kelani Holdings Pvt Limited’s (CKH) National Long-Term Rating at ‘AA+(lka)’ with a Stable Outlook. The rating reflects CKH’s established leadership in the domestic pneumatic tyre manufacturing sector and a resilient financial profile. These strengths are balanced by exposure to price-sensitive, cyclical and highly competitive end markets, which increase margin volatility.

The Stable Outlook reflects Fitch’s expectation that CKH will maintain its market position amid rising input costs and intensifying competition from imported tyres. It also indicates that the company will preserve adequate credit metrics despite periods of weaker earnings and increased investment requirements.

Key Rating Drivers

Macro and Sector Risks Remain: CKH faces demand and margin volatility due to its exposure to cyclical and price-sensitive end-markets and geographical concentration to Sri Lanka. Higher energy and input costs following the Iran war will put pressure on near-term tyre demand, despite a high share of replacement demand.

Resilient Financial Profile: Fitch believes that CKH’s robust financial profile, characterized by low leverage and sound liquidity, will cushion the company against the risks from a challenging operating environment. Fitch expects CKH’s EBITDA net leverage to remain well below the negative sensitivity of 1.0x over the next 24 months, despite Fitch anticipating lower earnings in the near term, significant capex and dividend distributions.

We expect CKH’s EBITDA net leverage to peak at 0.6x in the financial year ending March 2028 (FY28), leaving a buffer against sector risk before gradually declining.

Near-Term Margin Pressure: Fitch expects CKH’s gross profit margin to decline below 20% in FY27 from 24% in FY26 due to higher costs for imported and local raw materials and increased conversion costs driven by rising energy prices. This reflects CKH’s limited ability to fully pass through cost increases to end-users amid intense competition from imports. EBITDA margin is projected by Fitch to remain below 10%. Fitch expects a recovery in volumes and margins from FY28 on a gradual recovery in demand and stabilization in input costs.

Maintain Market Leadership: Fitch expects CKH to maintain its leading position in Sri Lanka’s pneumatic tyre manufacturing industry. The company’s established brand and extensive dealer network should aid market share, despite exposure to price-sensitive, cyclical end markets and intense competition. CKH uses adaptive pricing strategies to mitigate market volatility and preserve market share across key segments. Planned production facility upgrades are likely to enhance product quality, particularly radial tyres, and strengthen CKH’s competitive positioning.

Peer Analysis

CKH is rated one notch below Hemas Holdings PLC (AAA(lka)/Stable), reflecting CKH’s smaller operating scale and limited revenue diversification. This exposes CKH to greater cyclicality. Hemas benefits from significant exposure to defensive sectors, namely pharmaceuticals and fast-moving consumer goods, which collectively contribute over 90% of EBITDA and provide stable cash flow. In addition, Hemas holds strong market positions in pharmaceuticals, home and personal care as well as stationery.

Sunshine Holdings PLC (AA+(lka)/Stable) is a mid-sized conglomerate with presence in healthcare and consumer goods. Sunshine faces volatile cash flow and regulatory risks, whereas CKH is subject to cyclical demand and competitive pressures from imports. Both companies display comparable credit metrics, resulting in the same ratings.

CKH’s business risk profile is comparable to domestic footwear and tyre manufacturer DSI Samson Group (Private) Limited’s (AA(lka)/Stable). Both companies are exposed to cyclical end-market demand and competitive pressures from imports, despite holding strong market positions locally. However, CKH is rated one notch above DSG, reflecting CKH’s stronger financial profile.

CKH and domestic paint manufacturer JAT Holdings PLC (AA(lka)/Stable) have broadly similar business profiles. JAT’s cash flow is primarily generated from the cyclical construction sector, and it faces competition from both domestic and imported products. However, CKH’s lower leverage and larger operating scale underpin a stronger financial risk profile, supporting a rating one notch above JAT.

CKH’s credit profile supports a higher rating than large domestic banks, non-bank financial institutions and insurance companies, which are more exposed to sovereign stress due to holdings of large sovereign-issued securities for regulatory reasons. The large financial institutions also have a broader exposure to the various economic sectors.

Fitch’s Key Rating-Case Assumptions
– Revenue to decline by 0.3% in FY27 due to lower volumes and a slowdown in land transportation, partially offset by higher average selling prices. Revenue to recover from FY28, achieving a 4.8% CAGR by FY30.

– EBITDA margins to fall to 9.5% in FY27 due to an increase in cost of goods sold.

– Working capital cycle to remain around 100 days for the next 24 months.

– Annual maintenance capex of LKR700 million for the next four years and growth capex of LKR2.5 billion in FY27 and LKR1.5 billion in FY28.

– Dividend payout to be LKR1.5 billion in FY27 and LKR1.0 billion in FY28.

RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

– An increase in EBITDA net leverage above 1.0x for a sustained period.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

– No upgrade in the medium term, given CKH’s exposure to more volatile cash flow and its small scale relative to higher-rated peers.

Liquidity and Debt Structure
CKH’s liquidity position is supported by LKR3.3 billion in cash and cash equivalents at end-March 2026, comfortably covering LKR929 million of debt maturing over the next 12 months. Over 83% of FY27 maturities comprise short-term loans and overdraft facilities used for working capital, which we expect the company will roll over.

We expect free cash flow to turn negative over the next 24 months, reflecting increased capex and shareholder distributions. CKH has already approved bank loans to fund the capex. It had LKR16.0 billion in uncommitted short-term facilities as of July 2026, of which LKR14.0 billion was unused, further supporting liquidity.

Issuer Profile
CKH is a leading manufacturer of pneumatic tyres in Sri Lanka, with an extensive distribution network. It is a joint venture between India’s Ceat Limited and Sri Lanka’s Kelani Tyres PLC.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.

ECONOMYNEXT – A study by the Institute of Policy Studies of Sri Lanka (IPS) identifies opportunities to drive export growth through high-value agriculture and agro-processing.

The study finds that while primary agriculture accounts for 8.3% of Gross Domestic Product (GDP), the broader agrifood sector contributes 24.5% of GDP and 42.0% of total employment, underscoring its importance for economic growth and job creation.

Conducted as part of the Country Growth and Jobs Report of the World Bank, the study finds that the sector’s growth potential is constrained by complex tariff structures, policy uncertainty, low investment in agricultural research and development, and inadequate support for value-added production.

It recommends strengthening high-value, export-oriented agribusiness to enhance Sri Lanka’s export competitiveness, create higher-productivity employment, and support long-term economic development.

The study authored by IPS Research Fellow Asanka Wijesinghe shows that food and beverage manufacturing offers considerable potential for economic transformation.

“Developing food processing based on agricultural commodities offers a direct pathway from agriculture to industry. Agriculture supplies 38% of food processing inputs, while food processing sources 19% of its inputs from domestic agriculture. Strengthening agricultural productivity and expanding processing are therefore critical to sustaining growth,” Wijesinghe said.

An input-output analysis reveals that every USD 1 of final demand for food and beverage manufacturing generates USD 1.85 in total economic output, compared to USD 1.20 for primary agriculture.

The research also identifies six export clusters with strong growth potential; namely, cinnamon, other spices such as pepper and vanilla, coconut-based products, fruit and vegetable processing, seafood, and tea.

Coconut-related exports exceeded USD 1 billion in 2025, while fruit and vegetable processing exports grew by 302% over the past decade. Seafood exports have also recorded strong growth, supported by preferential market access under Generalised Scheme of Preferences Plus (GSP+).

Download the publication via the IPS website: https://www.ips.lk/high-value-and-export-oriented-agribusiness-unlocking-agri-food-sector-potential-in-sri-lanka/ (Colombo/Sep24/2026)

ECONOMYNEXT – GS1 Lanka said it was focusing on the next stage of product identification in Sri Lanka, as businesses prepare for the wider adoption of 2D barcodes and the growing demand for trusted product information.

The shift from traditional barcodes to 2D barcodes was the next major step, particularly as consumers increasingly look beyond a product’s identity to information they can trust about its origin, ingredients, authenticity and use, GS1 Lanka President Revan Fernando told the company’s 10th Annual General Meeting.

Unlike a conventional barcode used at checkout, a GS1 QR code can also connect consumers to a wider range of product information and support traceability and product verification through GS1 standards.

Fernando called on brands to get involved in the transition, noting that the change will require businesses to rethink how they use the limited space on product packaging and how they communicate with consumers.

GS1 Sunrise 2027 is a global industry initiative aiming to transition retail checkout systems to read 2D barcodes such as QR codes and Data Matrix codes alongside traditional 1D UPC stripes by the end of 2027.

Under its Sunrise 2027 initiative, GS1 Lanka is working with the retail and healthcare sectors to prepare businesses for the transition to 2D barcodes.

GS1 Lanka will also introduce a new retail information platform to help member brands provide richer product information and improve the presentation of their products to consumers.

The next phase will place greater emphasis on 2D barcodes, GS1 Digital Link, traceability and digital product information, as businesses prepare for a more connected and information-rich marketplace, GS1 Lanka CEO Alikie Perera said.

The organisation has also seen growing adoption of GS1 Activate and Verified by GS1, with more than 5,500 member companies registered on the platforms and over 20,000 product records uploaded. (Colombo/Sep24/2026)

ECONOMYNEXT- Sri Lanka’s Ceylon Chamber of Commerce said it was pleased to see “the tangible results of the commitment and sustained efforts towards restoring Sri Lanka’s macroeconomic stability”, reflected in Fitch Ratings’ decision to upgrade the country’s Long-Term Foreign-Currency Issuer Default Rating from ‘CCC+’ to ‘B-’, with a Stable Outlook.

“The upgrade is an important development in Sri Lanka’s economic recovery and provides recognition of the progress made following several years of significant economic challenges. Over the past six years, Sri Lanka has undertaken a difficult process of economic adjustment, including fiscal consolidation, revenue mobilisation, debt restructuring and structural reforms.

“The improved rating also reflects greater confidence in Sri Lanka’s macroeconomic stability and resilience. Over the past few years, the country has had to navigate significant external pressures, including impacts of the Hormuz conflict and climate- and environment-related shocks. The ability to maintain stability through these challenges highlights that the recovery has solid foundation.

“The priority now must be to preserve this stability and build on it through implementation of reforms related to trade facilitation, digital and labour amongst others that will drive growth and investment. Sri Lanka will need to maintain primary surpluses and sustain revenue mobilisation. At the same time, there is a need to gradually create greater fiscal space through a continued reduction in debt and debt-service ratios. Improving foreign exchange reserves will be important to ensure that the gains in stability are sustained. A targeted approach to poverty reduction should also remain a priority to ensure that the benefits of economic recovery and growth are broadly shared across society.

“The improved rating should also be viewed as an opportunity to strategically leverage the progress achieved to attract investment. Greater sovereign credibility can support investor confidence and create a stronger platform for attracting foreign direct investment, expanding productive capacity and accelerating private-sector-led growth.

“The Ceylon Chamber of Commerce remains committed to supporting this process and contributing to the policy dialogue needed to strengthen Sri Lanka’s economic fundamentals, improve the business environment and translate stability into sustainable and inclusive growth.” (Colombo/Sep24/2026)

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange opened higher on Thursday, CSE data showed, with the benchmark All Share Price Index moving up 0.12 percent.

The ASPI was up 24.55 points at 21,109.70, while the more liquid S&P SL20 was up 0.23 percent, or 13.44 points, at 5,960.94.

Positive contributors to the ASPI were Commercial Bank of Ceylon (up 0.25 percent at 204.50 rupees), Hemas Holdings (up 1.30 percent at 31.20 rupees), and Industrial Asphalts (Ceylon) (up 16.67 percent at 0.70 rupees).

ACL Cables (down 0.96 percent at 94.90 rupees) and Haycarb (down 0.24 percent at 208.00 rupees) were negative contributors.

Market turnover was 147.41 million rupees. Materials led turnover with 35.96 million rupees.

People’s Leasing & Finance announced that its debenture issue to raise up to 10 billion rupees was oversubscribed after receiving applications exceeding 10 billion rupees, closing the issue on September 23. Colombo Dockyard disclosed share dealings by director-related entity Senthilverl Holdings, which purchased and sold 17,086 shares at 119 rupees and 122 rupees each, respectively, on September 22. (Colombo/Sep24/2026)