Uncategorized

Sri Lanka’s Lion Brewery retains ‘AA-(lka)’ rating, outlook stable

Thursday November 28, 2019 4:22 pm

ECONOMYNEXT – Fitch Ratings said it has confirmed Sri Lanka-based Lion Brewery (Ceylon) PLC’s national long-term rating at ‘AA-(lka)’ with a stable outlook.

A statement said the rating reflects the brewer’s leading market position in the domestic beer industry, which is protected by high entry barriers from the regulatory ban on media advertising, Lion’s well-established brand and extensive retail coverage.

“However, Lion’s profitability can be affected in the short-term by frequent hikes in excise taxes on alcoholic beverages, although the company has been able to pass on these tax increases to customers with demand normalising within a lag of 12 to 18 months.”

The full report follows:
Fitch Ratings has affirmed Sri Lanka-based Lion Brewery (Ceylon) PLC’s National Long-Term Rating at ‘AA-(lka)’ with a Stable Outlook. Fitch has also affirmed the National Long-Term Rating on Lion’s outstanding senior unsecured debentures at ‘AA-(lka)’.

Lion’s National Long-Term Rating reflects its leading market position in the domestic beer industry, which is protected by high entry barriers from the regulatory ban on media advertising, Lion’s well-established brand and extensive retail coverage. However, Lion’s profitability can be affected in the short-term by frequent hikes in excise taxes on alcoholic beverages, although the company has been able to pass on these tax increases to customers with demand normalising within a lag of 12 to 18 months.

We have rated Lion’s debentures at the same level as its National Long-Term Rating as the debentures are not materially subordinated because there is no meaningful prior ranking debt.
KEY RATING DRIVERS

Strong Financial Profile: Lion’s financial profile is strong with Fitch expecting net leverage – defined as lease-adjusted debt net of cash/operating EBITDAR – to remain below 1.0x over the next few years. Leverage has improved considerably, from 2.7x in the financial year ending 31 March 2018 (FY18) to 0.6x in FY19 and 0.5x during the trailing 12 months to end-2QFY20. The improvement is due to better sales volumes that drove strong EBITDA growth, amid the reversion to the previous excise tax regime which taxes beer at a relatively lower rate per unit of alcohol than spirits.

Weak Links with Parent: Fitch rates Lion on its standalone strength due to the weak linkages between its ultimate parent, Carson Cumberbatch PLC, in line with Fitch’s Parent and Subsidiary Rating Linkage criteria. Lion has a stronger credit profile compared to Carson. Although Carson has control over Lion, its influence is mitigated by a large minority shareholder, Carlsberg Breweries A/S (BBB+/Stable), which owns 25% of Lion. Carson and Lion maintain separate financing arrangements and there is no cash fungibility between the two other than for dividends.

Resilient Sales Demand: Fitch expects Lions sales volume to increase by 12% in FY20 due to relatively resilient demand for strong beer, while we expect weak tourist arrivals to affect mild beer sales. Lion’s net revenue rose by 13% yoy in 1HFY20 despite the increase in excise taxes in March 2019 and the challenging operating environment following the Easter Sunday terrorist attacks. We expect mild beer sales to recover from FY21 onwards based on our expectations of a recovery in tourism.

Fitch expects the tourism industry to normalise from FY21 onwards after a faster recovery than the industry had expected – as evident from in-bound tourist arrivals increasing at an average of 38% month-on-month from June to September 2019. A relaxation in key tourist markets of travel advisories on Sri Lanka has supported the growth in visitors.

Adequate Production Capacity: Lion has sufficient brewing capacity for the next few years, with plant capacity utilisation at 64% as of FY19. Lion expanded its production capacity between FY14-FY16, which drove the high capex of around LKR4 billion a year, or 20% of revenue. We expect capex to moderate to around LKR1.5 billion a year in the next two years.

Stable Profitability, Working Capital: We expect the EBITDAR margin to stabilise at around 30% in FY20 and FY21, but lower than the 36% in FY19, due to the challenging operating environment. We expect Lion’s net cash conversion cycle to improve, stabilising at around 110 days in the next few years, which is in line with FY19 and better than the 136 days in FY18. The improvement in working capital will stem mainly from increased sales following the reduction in excise taxes on beer relative to spirits.

High Regulatory Risk: Domestic alcoholic beverage producers face frequent revisions to excise duties, which can cause near- to medium-term operating cash flow volatility. Spirits are taxed 22% higher per proof litre compared with beer, after taxes on beer were increased by 12.5% in March 2019. The current tax regime is more consistent with the practice that prevailed before November 2015, when drinks with lower alcohol content such as beer were taxed at lower rates per proof litre than spirits.

Fitch expects the current excise tax regime to prevail over the medium term as it encourages the consumption of drinks with lower alcohol content and has been the norm historically, except for the period between November 2015 and November 2017. Fitch believes any further tax increases will be gradual, considering the importance of the industry to government revenues. Excise duties from alcoholic-beverage makers made up 7% of government tax revenue in 2018.
DERIVATION SUMMARY

Lion is rated at the same level as domestic conglomerate Hemas Holdings PLC (AA-(lka)/Stable). Lion has a leading market share in the local beer industry amid high entry barriers and low leverage, while Hemas is a well-diversified conglomerate with exposure to defensive pharmaceuticals, personal care and homecare products, and stationery products in the fast-moving consumer goods space. Hemas also has similar leverage as Lion.

Lion is rated three notches below Distilleries Company of Sri Lanka PLC (DIST) (AAA(lka)/Stable) – the country’s biggest spirits manufacturer – reflecting DIST’s much larger operating scale and dominant market position in spirits, which are more widely consumed domestically than beer. DIST has about a 70% share of the alcoholic-beverage market. Historically, DIST has been less sensitive to changes in tax regulations than Lion.

Richard Pieris & Company PLC (A(lka)/Stable) is rated two notches below Lion, reflecting its weaker business risk profile due to significant exposure to the volatile agriculture segment; thinner EBITDA margins; and higher leverage.
KEY ASSUMPTIONS

– Revenue growth to be resilient, rising by around 18% in FY20 and by 11% in FY21, despite the tax increase in March 2019 and a dampened operating environment, and then rising by 5%, on average, during FY22-FY23.

– EBITDAR margin to narrow to 30% in FY20, from 35.7% in FY19, and to stabilise at around 32% from FY21.

– Excise duty on strong and mild beer to increase by 9%, on average, per proof litre a year over FY20-FY23.

– Capex intensity to average around 5% of revenue over FY20-FY23.

– We have assumed the free cash flow generation to be paid as dividends, in the absence of a stated dividend policy.

– Working capital outflows to average around LKR1.3 billion a year in the medium term.
RATING SENSITIVITIES

Developments That May, Individually or Collectively, Lead to Positive Rating Action

– No positive rating action is likely unless the company is able to improve its business risk profile and scale of operations significantly while maintaining the current financial profile.

Developments That May, Individually or Collectively, Lead to Negative Rating Action

– An increase in Lion’s lease-adjusted debt net of cash/EBITDAR over 3.0x for a sustained period.
LIQUIDITY AND DEBT STRUCTURE

Comfortable Liquidity: Lion had unrestricted cash and cash equivalents of LKR10.3 billion and unused credit lines of LKR9.7 billion at end-March 2019, to meet LKR9.2 billion of debt maturing within the following 12 months. Working capital debt accounted for around LKR5 billion of near-term maturities – which is backed by a net working capital position of LKR4 billion and supported by a healthy cash conversion cycle of 110 days as of FY19. The company’s strong credit profile and consistent access to bank funding supports liquidity further.
(COLOMBO, 28 November 2019)

Climate Change

Sri Lanka’s flash floods in capital point to systemic institutional failure, ignored directives

Monday November 9, 2026 6:00 pm

ECONOMYNEXT – As torrential monsoon downpours transformed Sri Lanka’s commercial capital’s thoroughfares into raging brown rivers on Friday (06) submerging vehicles, paralyzing public transit, and inundating critical facilities like the National Hospital, the crisis was framed by authorities as an act of nature.

But for the millions of residents wading through waist-deep water, the disaster was not merely meteorological. It was man-made, preventable, and a glaring testament to gross institutional negligence.

Vraîe Cally Balthazaar, the Mayor of the island nation’s biggest local governing body Colombo Municipal Council (CMC) posted on her FaceBook (Meta) platform just a week ago before the floods that people in her ward “have had to live with the risk of flooding for years” after the stormwater drain running through the Jawatta Public Cemetery collapsed in 2019.

She said in the post that she promised the residents that the CMC would get the repairs done before the end of September, and she was happy to say that the CMC has “managed to complete the work by September 15.

“And sometimes, something as simple as fixing a drain can make a real difference to an entire neighbourhood,” Balthazaar said.

However, the flash floods saw the same area heavily flooded despite the ‘fixing’ by the CMC.

Just 24 days before the floods, Prime Minister Harini Amarasuriya herself issued a direct, unequivocal order to government officials and municipal authorities to treat the cleaning of Colombo’s canal and drainage systems as an exceptional priority.

She directed to expedite the work and complete it within two weeks to ensure proper rainwater management amid anticipated increases in rainfall.

Prime Minister Amarasuriya issued these directives while addressing the Colombo District Coordinating Committee meeting held on October 13 at the Narahenpita District Secretariat.

During the meeting, officials from divisional secretariat offices, the Agrarian Development Department, and the Provincial Irrigation Department highlighted existing challenges in cleaning drainage and canal systems, noting issues such as a shortage of technical officers and difficulties faced in formulating plans and estimates.

Her instruction came in response to early meteorological indicators pointing toward an intensifying inter-monsoonal rainfall season.

But the floods last week proved that these directives had been ignored, delayed, and left unimplemented by the very bodies sworn to protect the city’s populace.

Recognizing the chronic vulnerability of the commercial capital’s low-lying geography, the Prime Minister instructed relevant stakeholders to systematically clear Colombo’s primary canals, secondary outlets, and subterranean drainage systems.

Crucially, the directive came with a strict deadline: a two-week window to complete the comprehensive clearing of blockages, silt, and solid waste that choke the city’s waterways.

Colombo would not have had last week’s floods, had the Prime Minister’s instruction been heeded and executed.

But the Prime Minister’s instruction designed precisely to preempt the catastrophic urban flooding that has chronically plagued Colombo during heavy weather was ignored.

Yet, when the skies opened up last Friday (06), the two-week deadline had long expired into the ether of bureaucratic inaction.

The canals remained congested with plastic debris, unauthorized construction bottlenecks, and thick layers of silt.

The drainage systems, starved of maintenance, failed instantly.

Neither the central government machinery nor the Colombo Municipal Council (CMC) can wash their hands of accountability.

The ‘Clean Sri Lanka’ programme under the current government has been created to deal with prevention of flooding among many other ambitious goals.

“The responsibility for this damage must be borne by the President even more than the Mayor,” former Urban Development and Megapolis Minister Champika Ranawaka, a strong government critic, said on his YouTube platform.

“He is the head of the disaster management apparatus, and ‘Clean Sri Lanka’ operates under his direct leadership. Because of his actions and their administrative conduct, the entire state machinery has been brought to a standstill.”

Anatomy of Municipal Paralysis

When orders from the higher office like Prime Minister of the state can be casually sidelined by municipal inertia, it exposes a profound fracture in governance, one where public safety is compromised by institutional paralysis.

At the heart of Colombo’s drainage crisis is a systemic failure of local governance and inter-agency coordination.

The Colombo Municipal Council, tasked with the day-to-day stewardship of municipal infrastructure, waste management, and local drainage networks, has long operated in an administrative comfort zone characterized by reactive posturing rather than proactive mitigation.

When the Prime Minister’s directive was issued in mid-October, it should have triggered an immediate emergency mobilization.

Municipal work crews, heavy machinery, and desilting operations ought to have been deployed across every vulnerable ward, from the commercial hubs of Fort and Pettah to densely populated residential quarters like Borella, Wellawatte, and Grandpass.

Instead, citizens witnessed what can only be described as administrative inertia.

Bureaucratic red tape, sluggish procurement of maintenance contracts, and a lack of accountability mechanisms meant that instructions from the Prime Minister trickled down into endless committee meetings rather than field operations.

By treating a critical pre-monsoon cleanup as a routine administrative task rather than an urgent, life-saving imperative, municipal officials displayed a reckless disregard for urban risk management.

The government repeatedly said it has collected ample tax revenue to run the country. But that money could not be used urgently to protect the Colombo city when it was evident what was going to happen as per Prime Minister Amarasuriya’s instructions.

Furthermore, the failure extends beyond mere delayed cleanups to encompass chronic structural enforcement failures.

Over decades, Colombo’s natural hydrological buffers including its wetlands, marshes, and secondary flood retention areas have been systematically degraded or encroached upon by uncoordinated commercial and residential developments.

When drainage systems are clogged with garbage while vital retention pathways are blocked by concrete, even a standard heavy downpour is bound to trigger catastrophe.

Friday’s deluge merely exposed the cumulative cost of this willful administrative blindness.

Economic Toll of Negligence

The consequences of this systemic failure were borne immediately by ordinary citizens and critical public infrastructure.

The inundation of the National Hospital of Sri Lanka, where floodwaters unprecedentedly breached critical service areas, should be considered a national scandal.

That a premier healthcare institution can be crippled within 2 hours of heavy rain, jeopardizing patient care and compromising sterile environments, illustrates the deadly stakes of municipal failure.

Beyond the hospitals, small business owners watched their livelihoods float away, commuters were stranded for hours in gridlocked, submerged buses, and low-income families residing in underserved settlements suffered extensive property damage.

For an urban economy trying to anchor Sri Lanka’s fragile post-crisis recovery, recurring paralyzing floods exact a heavy toll in lost productivity, infrastructure damage, and emergency response costs.

Accountability

The CMC and government have pointed fingers at the illegal structures erected under past governments for the latest disaster. But this government has already been in power for two years.

In the aftermath of the disaster, routine finger-pointing between central agencies and municipal bodies also has begun, with officials attempting to deflect blame onto unprecedented rainfall volumes.

But meteorological data offers no refuge for negligent administrators.

The rainfall, while heavy, was seasonally anticipated; indeed, it was precisely why the Prime Minister issued her October directive.

When a directive issued by the second-in-command of the country is left gathering dust on a municipal desk while citizens face preventable devastation, the social contract breaks down.

The current government and the Colombo Municipal Council cannot hide behind excuses of resource constraints or administrative oversight.

Preventing flash floods requires more than issuing seasonal press releases or convening post-disaster committees after the water has receded.

It demands rigorous enforcement, transparent institutional accountability, and a zero-tolerance approach to administrative lethargy.

If the authorities cannot execute basic drainage maintenance, Colombo will remain structurally vulnerable, hostage to the next raincloud, and failed by the very institutions meant to protect it. (Colombo/November 08/2026)

Bonds & Forex

Sri Lanka rupee closes at 332.53/59 to US dollar spot, bond yields edge up

Monday November 9, 2026 5:05 pm

ECONOMYNEXT – Sri Lanka’s rupee closed at 332.53/59 to the US dollar spot on Monday, from 332.55/60 the previous day, while bond yields closed higher, dealers said.

A bond maturing on 15.09.2029 closed at 190/98 percent, up from 10.85/95 percent.

A bond maturing on 01.08.2030 closed at 11.07/12 percent, up from 11.05/10 percent.

A bond maturing on 01.02.2031 closed at 11.30/40 percent, up from 11.10/15 percent.

A bond maturing on 15.12.2032 closed at 11.65/70 percent, up from 11.55/65 percent.

A bond maturing on 01.11.2033 closed at 11.95/12.00 percent, up from 11.90/95 percent.

A bond maturing on 15.10.2034 closed at 12.10/15 percent, up from 12.05/12 percent.

A bond maturing on 15.08.2036 closed at 12.40/50 percent, up from 12.30/40 percent. (Colombo/Nov9/2026)

Markets

Sri Lanka stocks close up 1.37-pct, banks lead turnover

Monday November 9, 2026 3:29 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed up on Monday, CSE data showed, with the benchmark All Share Price Index moving up 1.37 percent.

The ASPI was up 291.72 points at 21,531.37, while the more liquid S&P SL20 was up 1.67 percent, or 100.96 points, at 6,146.34.

Positive contributors to the ASPI were Commercial Bank of Ceylon (up 2.86 percent at 216.00 rupees), Hatton National Bank (up 1.52 percent at 399.75 rupees), Asiri Hospital Holdings (up 12.86 percent at 31.60 rupees), Tokyo Cement Company (up 5.22 percent at 84.70 rupees), and Access Engineering (up 3.93 percent at 81.90 rupees).

Carson Cumberbatch (down 4.24 percent at 712.00 rupees), Richard Pieris and Company (down 2.43 percent at 28.10 rupees), LOLC Holdings (down 0.62 percent at 400.00 rupees), Renuka Holdings (down 2.63 percent at 37.00 rupees), and Chevron Lubricants Lanka (down 0.61 percent at 204.25 rupees) were top negative contributors.

Market turnover was 3.33 billion rupees. The S&P/CSE Banks Industry Group led turnover with 667.76 million rupees.

The session saw heavy crossings, according to Raynal Wickremeratne, Head of Research and Strategy at NDB Securities. Significant crossings included Keells (23 million rupees), Distilleries Company (27.7 million rupees), Sunshine Holdings (30.6 million rupees), Commercial Bank (32.4 million rupees), Ceylon Tobacco Company (35.6 million rupees), Hatton National Bank (39.5 million rupees), Prime Lands (40.5 million rupees), and HAS Holdings (41.5 million rupees).

In corporate news, Hayleys Retail Holdings Ltd announced it has partnered with supply chain software provider Blue Yonder to build and scale an AI-native grocery supermarket chain across Sri Lanka. (Colombo/Nov09/2026)

Information Technology

Sri Lanka’s Hayleys Retail to launch supermarket chain with Blue Yonder

Monday November 9, 2026 3:12 pm

ECONOMYNEXT — Hayleys Retail Holdings Ltd has selected supply chain software provider Blue Yonder to build its grocery retail operations from the ground up, the two companies said in a joint statement.

Hayleys Retail, a member of Sri Lanka’s diversified conglomerate Hayleys Group, plans to open several stores in the near future to serve consumers across the country. The agreement marks Blue Yonder’s first retail customer in Sri Lanka.

“Our entry into supermarket retail is about bringing that same commitment to quality and reliability closer to everyday Sri Lankan consumers,” Mohan Pandithage, Chairman and Chief Executive of Hayleys PLC said.

“With Blue Yonder, our teams will have AI-driven insight to deliver a seamless, consistent shopping experience across every store,” he said.

Hayleys, which accounts for approximately 5 percent of Sri Lanka’s export income and operates across 17 business sectors, is entering the large-scale supermarket space by drawing on its group strengths in manufacturing, logistics, and services.

The company selected Blue Yonder to connect its data across merchandising and shelf space, deploy artificial intelligence agents to catch operational issues early, and scale its business into a national network without changing platforms.

The rollout will begin with merchandise operations to manage suppliers, items, costs, and pricing, followed by machine learning capabilities to forecast demand and balance store inventory during seasonal peaks.

“Hayleys Retail is choosing one where AI is the foundation rather than an add-on—connected data and agentic AI built into core merchandising operations, and planning that learns as the business grows,” Antonio Boccalandro, President, APAC at Blue Yonder said.

The retailer plans to use the platform to automate routine store tasks and adjust inventory according to real-time sales and local market trends as its store footprint grows. (Colombo/Nov09/2026)

Stocks & Companies

Sri Lanka’s Citrus Leisure extends Lotus Tower management pact

Monday November 9, 2026 1:16 pm

ECONOMYNEXT – Sri Lanka listed hospitality firm Citrus Leisure said it has extended an agreement to manage consumer-facing and entertainment spaces at the Colombo Lotus Tower, which includes revolving restaurant Blue Orbit, until June next year.

The initial agreement signed between Citrus Leisure and Colombo Lotus Tower Management Company (Private) Limited (CLTMC) is due to expire on December 11.

“The Board of Directors of CLTMC at meeting held on 2nd November 2026 has resolved to extend the term of the Management Agreement and continue the existing Management Agreement until 30th June 2027, to which the company has given its concurrence,” the company said in a market filing.

Citrus Leisure Plc opened its revolving restaurant at the Lotus Tower in December 2023.

The company signed a 3-year agreement with CLTMC in May 2023 to provide services in the management of (l) the banquet hall 1 on the 25th floor, (2) the banquet hall 2 on the 26th floor, (3) the revolving restaurant on the 27th floor, (4) the 6 suites situated on the 28th floor and the kitchen in the basement floor of the Colombo Lotus Tower.

The 350-meter or 1,150-feet tower, the tallest in South Asia, was built at a cost 104.3 million US dollars with 80 percent of the money borrowed from Exim Bank of China.

Located in the commercial heart of Colombo, the tower has been called a symbolic landmark of Sri Lanka as well as a colossal white elephant and has been mired in controversy for years. (Colombo/Nov9/2026)

Markets

CIC Holdings Sept quarter net profit rises 20-pct to Rs1.7bn

Monday November 9, 2026 11:50 am

ECONOMYNEXT — Sri Lanka conglomerate CIC Holdings recorded a net profit of 1.66 billion rupees for the quarter ended September 30, rising 20.3 percent from 1.38 billion rupees in the same quarter last year, interim accounts showed.

The group posted basic earnings per share of 0.87 rupees for the September quarter, up from 0.73 rupees a year earlier.

Quarterly revenue grew 3.4 percent to 20.89 billion rupees from 20.20 billion rupees, supported by broad-based growth across industrial solutions, livestock, and healthcare segments, which counterbalanced relative demand moderation in agricultural inputs.

Cost of sales rose 5.3 percent to 15.20 billion rupees, outpacing revenue growth and causing gross profit to contract marginally by 1.2 percent to 5.68 billion rupees.

Results from operating activities dropped 7.3 percent to 2.66 billion rupees from 2.87 billion rupees, impacted by higher operating overheads.

Selling expenses expanded 6.8 percent to 2.15 billion rupees, and general and administrative expenses climbed 5.8 percent to 1.07 billion rupees, while other operating income dropped 29.6 percent to 117.40 million rupees.

However, operating profits were cushioned by an impairment reversal on trade receivables of 85.83 million rupees, turning around from an impairment provision of 23.38 million rupees in the corresponding quarter last year.

Net finance costs climbed 35.4 percent to 712.25 million rupees from 526.01 million rupees.

The increase was driven by a 30.8 percent rise in finance expenses to 771.46 million rupees, primarily reflecting higher interest expenses on loans to finance elevated working capital and inventory requirements.

The quarter’s bottom line was strongly bolstered by CIC’s equity-accounted investment in John Keells Holdings PLC (JKH).

Share of profit from equity-accounted investees surged more than fourfold to 590.50 million rupees from 257.87 million rupees, driven by JKH’s strong profit expansion during the period.

The group also recognized a gain on bargain purchase of 55.59 million rupees during the quarter resulting from additional share purchases in JKH where the proportionate net asset value exceeded acquisition cost, compared to no such gain a year earlier.

With associate income gains offsetting operating margin contraction and higher borrowing costs, group pre-tax profit held virtually flat at 2.59 billion rupees, down 0.11 percent.

Income tax expense fell 29.4 percent to 606.24 million rupees from 858.71 million rupees, driving total group profit for the period up 14.1 percent to 1.98 billion rupees.

Total group assets stood at 108.58 billion rupees as of September 30, up from 99.75 billion rupees at the end of March 2026.

Group net asset value per share increased to 25.52 rupees from 22.10 rupees a year earlier.

CIC Holdings’ ordinary voting shares closed at 27.80 rupees at the end of September.(Colombo/Nov09/2026)