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Sunday February 25th, 2024

Sri Lanka’s Watawala Plantations profits down in Dec on flat revenue

ECONOMYNEXT– Watawala Plantations Plc, Sri Lanka’s largest palm oil producer, said the firm’s net profits fell 17 percent to 174 million rupees in the December 2019 quarter from a year earlier on flat revenue.

The group reported earnings of 86 cents per share for the quarter in its interim financial report.

For the nine months ending December, Watawala earned 3.82 rupees a share on profits of 776.6 million rupees, up 15 percent. The stock closed Friday at 25.40 rupees.

Revenues fell 1 percent to 775 million rupees in the December 2019 quarter on miscellaneous businesses, and cost of sales grew 2 percent to 493 million rupees, dragging down the gross profits 5 percent to 282 million rupees.

Finance costs grew 19 percent to 39.4 million rupees.

Watawala reduced its long-term borrowings to 649.1 million rupees at end-December from 1.1 billion rupees at the start of the financial year nine months earlier, while short-term borrowings grew to 181.1 million rupees from 144.5 million rupees.

Revenue for the quarter had fallen on the ‘other’ miscellaneous segment, which fell to zero from 13.3 million rupees a year earlier. Watawala has some residual tea businesses, as well as spice and timber operations.

The group spun off its main tea business into Hatton Plantations Plc, which was sold of to Singapore-based G&G group in 2019.

The main palm oil segment profits grew to 628.2 million rupees in December from 622.5 million rupees a year earlier, while net profits fell to 202.9 million rupees from 249.2 million rupees on higher cost of sales and finance expenses.

Watawala Plantations Managing Director Vish Govindasamy in an earnings release said the palm oil industry will face trouble in the future, as new tree planting has been restricted.

“Company has been challenged by the regulations imposed on palm oil and there by unable to continue the planting program,” he said.

“The industry had requested at least planting of the seedling materials laying at the nursery. The industry is engaging with the ministry authorities to get a clear future direction on the regulation relating to the industry.”

Sri Lanka has had oil palm for 51 years with no problems, but false accusations against the crop started only five years ago, the Planter’s Association representing regional plantations companies said in an earlier report.

The accusations include that oil palm depletes groundwater and causes droughts, as well as claims that they cause mange in dogs and pushing up the population of serpents.

The global opposition to palm oil came from Malaysia’s practices involving cutting down tropical rainforests to plant oil palm.

However, in Sri Lanka only unproductive rubber estates are re-planted with palm oil.

The government gives incentives to palm oil in the form of import duties on vegetable and coconut oil. High import duties make oil palm more profitable than rubber or any other crop by keeping domestic prices higher than world prices.

Sri Lanka also had high export taxes (cess) on raw rubber, which also reduces income from the crop to below the global price discouraging the
cultivation of any other crop.

Oil palm is also less labor intensive.

Meanwhile, the group’s dairy farm reported 147.2 million rupees in revenue, up 1 percent from 145.8 million rupees a year earlier, while the loss after tax improved to 42.1 million rupees form 47.2 million rupees a year earlier.

This is despite Govindasamy saying that milk yields and prices have both grown ‘significantly’.

“The revenue showed a continuous improvement during the period, as the milk volumes and prices have increased significantly,” he said.

“The improved milk yield was driven by majority of the herd moving into the second lactation cycle, while the stringent cost optimization measurers resulted in improved performance during the period.”

He said the dairy segment will perform better in the quarters ahead.

“The dairy segment will further consolidate its operations with better prices, due to the increase in demand for fresh milk in Sri Lanka,” Govindasamy said.

“Furthermore, the segment will focus on rationalizing feed costs, and increasing the milk yields.”

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Sri Lanka could get US$500mn from ADB in 2024

ECONOMYNEXT – Sri Lanka could receive 500 million US dollars in support from the Asian Development Bank in 2024 based on the progress of policy reforms, Country Director of the Manila-based lender, Takafumi Kadono said.

The ADB expect to go to its Board around March or April with a 100 million US dollar power sector loan subject to the cabinet of ministers of approving a revised electricity reform bill.

A 100 million dollar loan to support SMEs could also be approved in the early part of the year. Sri Lanka is setting up a credit guarantee agency to support credit for small firms.

A 200 million dollar credit for financial sector was also slated for the year. The ADB gave the first tranche of the financial sector policy loan late last year.

A $100mn for the water sector could also be approved later in the year.

Sri Lanka could get around 200 to 300 million US dollars a year at the lowest rate, or concessional ordinary capital resources (COL) rate of 2 percent.

The balance of would come at the ordinary capital resource rate linked to SOFR.

The ADB has also started work on a ‘Country Partnership Strategy’ for Sri Lanka covering the 2024-2028 period, Kadodo said. (Colombo/Feb25/2024)

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Sri Lanka’s multi-aligned foreign policy based on friendship: Min

ECONOMYNEXT – Sri Lanka’s multi-aligned foreign policy is based on friendship to all and enmity to none, its Minister of Foreign Affairs has said.

“Non-alignment means not becoming a bystander. Non-alignment means you are not forced or coerced into a camp to take sovereign decisions… you make your own choices. Whether it is commercial, security, regional or otherwise,” M U M Ali Sabry said on X (twitter).

“I have repeatedly stressed that sovereignty is the right to have your own opinion on what’s right and wrong, and to stand by your principles. Our multi-aligned foreign policy is based on friendship to all and enmity to none,” Sabry was quoting from his speech at the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) Foreign Policy Forum, on the theme ‘Reassessing Non-Alignment in a Polarised World’.

Sri Lanka is one of the founding members of the Non-Aligned Movement.

The strategically located island has been increasingly walking a fine line between opposing global factions as it seeks to come out of a financial crisis. (Colombo/Feb24/2024)

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Sri Lanka’s Commercial Bank Dec net down on tax provisions

ECONOMYNEXT – Sri Lanka’s Commercial Bank of Ceylon reported profits of 6.9 billion rupees from the December 2023 quarter down 21 percent, despite an improvement in net interest income and lower provisions, amid a change in tax provisions.

Pre-tax profits were 8.89 billion rupees up from 2.4 billion rupees. There was a 6.4 billion tax reversal last year compared to a 1.7 billion rupee tax charge this year.

Commercial Bank reported earnings of 5.26 rupees for the quarter. For the year to December 2023 earnings were 16.07 rupees per share on total profits of 21.1 billion rupees, down 11.3 percent.

Net fee and commission income was down 1.2 percent to 6.1 billion rupees.

Net interest income went up 16.8 percent to 25.5 billion rupees, with interest income rising marginally by 1.3 percent to 73.0 billion rupees and interest expense falling 5.45 percent to 47.5 billion rupees.

Loans and advances to customers grew 4.06 percent to 1.17 billion rupees in the year to December. Debt and other financial instruments fell 10.5 percent to 649 billion rupees.

Financial assets measured and fair value through other comprehensive income was at 287 billion rupees, up from 117 billion rupees.

Impairment charges were 13.1 billion rupees, down from 19.6 billion rupees last year.

Gross assets were up 6.45 percent to 2.36 billion rupees. Net assets were up 5.51 percent to 214 billion rupees. (Colombo/Feb24/2024)

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