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Daily Mirror (Sri Lanka) - - FINANCE -

Dr. Coomaraswamy said that al­ready the gov­ern­ment is act­ing with fore­sight; de­spite not hav­ing sig­nif­i­cant debt ma­tu­ri­ties in re­cent months, the gov­ern­ment has been rais­ing sig­nif­i­cant funds to build a buf­fer stock for pay­ments over the next year.

“So when­ever there’s ex­cess liq­uid­ity we go to the mar­ket and raise and keep the money as a buf­fer, so that when it comes to the ma­tu­rity, we are not com­pelled to raise that money at any mar­ket in­ter­est rates that pre­vail at that time. So that’s more to smoothen out that cy­cle than have volatil­ity,” he said.

The Li­a­bil­ity Man­age­ment Act will al­low for the gov­ern­ment to raise a cer­tain amount of debt above the lim­its spec­i­fied in reg­u­lar bud­get ap­pro­pri­a­tions, in or­der to raise funds for debt re­pay­ment and emer­gency fund­ing.

Sri Lanka also has sig­nif­i­cant con­tin­gent li­a­bil­i­ties un­der the bal­ance sheets of state-owned en­ter­prises amount­ing to Rs.1.2 tril­lion, which form a po­ten­tial debt shock source for the econ­omy, ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund.

The Li­a­bil­ity Man­age­ment Act will also act as a contingency plan for this debt shock.

Fur­ther, the gov­ern­ment had an­nounced its in­ten­tions to start rolling over mas­sive for­eign debt re­pay­ments amount­ing to US $ 15 bil­lion be­tween 2019 and 2022 ear­lier in 2018, in or­der to ben­e­fit from lower global in­ter­est rates.

Dr. Coomaraswamy fur­ther went on to say that the funds earned from state as­set sales, such as the Ham­ban­tota port and the pro­posed sale of sev­eral non-strate­gic en­ter­prises, will be saved up for debt re­pay­ment.

“Ham­ban­tota money for in­stance will go to a for­eign cur­rency ac­count for for­eign li­a­bil­ity man­age­ment. Any ru­pee mo­bi­lized through di­vesti­tures will go to an­other ac­count to be uti­lized for do­mes­tic li­a­bil­ity man­age­ment,” he said.

The Swiss multi­na­tional is grap­pling with how to cater to the shift­ing de­mands for less sug­ary and health­ier prod­ucts in al­most all mar­kets it op­er­ates.

While Nes­tle is try­ing to ad­just its strat­egy to­wards this grow­ing trend in most ma­ture mar­kets, it has so far done very lit­tle in emerg­ing mar­kets.

This was proven when the Sri Lankan pres­i­dent him­self re­cently sin­gled out Milo— Nes­tle’s most pop­u­lar choco­late malted drink— for its high sugar con­tent.

Launch­ing a walk to mark the World Di­a­betic Day at Galle Face Pres­i­dent Maithri­pala Sirisena said last Sun­day that Milo’s sugar con­tent had in­creased from 15.0 per­cent to 16.5 per­cent within five years and de­manded to re­duce it to below 5.0 per­cent or face leg­isla­tive con­trols.

The in­ci­dent per­haps marks the first in the his­tory of Nes­tle where its prod­uct was sin­gled out by a pres­i­dent of a coun­try. The pres­i­dent’s re­marks are go­ing vi­ral on so­cial me­dia and the com­pany is yet to re­spond to the re­marks.

Pre­sent­ing his maiden bud­get last week Fi­nance Min­is­ter Man­gala Sa­ma­raweera pro­posed to im­pose an ex­cise duty of 50 cents per gram of sugar con­tained in fizzy drinks and other bev­er­ages.

This prob­a­bly was the first time in Sri Lanka’s his­tory where a na­tional bud­get con­tained a tan­gi­ble mea­sure to make its peo­ple health­ier.

The new tax was aimed at con­trol­ling non-com­mu­ni­ca­ble de­ceases such as di­a­betes and obe­sity, spe­cially among chil­dren.

Nes­tle glob­ally has been strug­gling for years to main­tain growth and at the be­gin­ning of the year it aban­doned its 5-6 per­cent organic growth tar­get as the sales have been ane­mic.

The multi­na­tional is also be­ing pres­sured by an ac­tivist in­vestor to main­tain a profit mar­gin and im­prove per­for­mance and the com­pany in Septem­ber set a trad­ing profit op­er­at­ing mar­gin of 17.518.5 per­cent by 2020 with­out ex­tra­or­di­nary gains.

Mean­while, the Sri Lankan unit for the nine months ended Septem­ber 30, 2017, re­ported earn­ings of Rs.45.71 a share or Rs.2.46 bil­lion, down by a sharp 31 per­cent YOY.

Rev­enue for the pe­riod was Rs.27.6 bil­lion, slightly down by 0.7 per­cent YOY.

As at Septem­ber 30, Nes­tle SA held a 90.82 per­cent stake in Nes­tle Lanka PLC.

OPEC min­is­ters are sched­uled to hold a cru­cial meet­ing in Vi­enna at the end of Novem­ber to dis­cuss ex­tend­ing the cuts deal as well as im­pos­ing the quota sys­tem on coun­tries that have so far been ex­empted, namely Libya, Iran and Nige­ria.

Car­tel king­pin Saudi Ara­bia and the world’s top pro­ducer Rus­sia have voiced sup­port for a rollover to the deal, the du­ra­tion of which re­mains up for de­bate.

OPEC Sec­re­tary Gen­eral Mo­hammed Barkindo said the pro­duc­ers deal had yielded solid re­sults as a “valid re­sponse to the worst oil price down cy­cle in his­tory”.

“There are clear in­di­ca­tions that the mar­ket is re­bal­anc­ing at an ac­cel­er­at­ing pace,” he said at the con­fer­ence.

Barkindo said the oil mar­ket was on track to sta­bilise be­cause of a drop in crude stocks and a rise in global de­mand.

The OPEC chief also called on new oil pro­duc­ers, in­clud­ing US shale crude pro­duc­ers, to join a broader agree­ment to se­cure the fu­ture of en­ergy.

Barkindo said talks were un­der way to “in­sti­tu­tion­alise” the co­op­er­a­tion be­tween OPEC and NON-OPEC mem­bers to reg­u­late the mar­ket.

“Now, we are not talk­ing about OPEC 14 but about the global plat­form 24,” he said, re­fer­ring to the num­ber of oil-pro­duc­ing mem­bers that signed the pro­duc­tion cut ac­cord.

Sa­ma­raweera im­posed taxes on tele­com tow­ers and text mes­sages, and in­tro­duced a debt re­pay­ment levy of 20 cents per Rs.1,000 bank trans­ac­tion with ef­fect from April 1 next year.

“Re­tail in­vestors are not clear about the bud­get. That is the main rea­son for the fall. Re­tail in­vestors were not ac­tive at all,” said First Cap­i­tal Hold­ings PLC Se­nior Re­search An­a­lyst Atchuthan Sri­ran­gan.

“There are sev­eral taxes that are not de­cided if they should be borne by the cus­tomers or busi­nesses. But even­tu­ally they will be passed to the cus­tomers, mak­ing cost of liv­ing higher.”

He also said the re­lease of the gov­ern­ment gaz­zate no­ti­fi­ca­tion on new In­land Rev­enue Act will also weigh on the mar­ket in the next few days.”

Turnover was Rs.1.29 bil­lion yes­ter­day, more than this year’s av­er­age of around Rs.956 mil­lion.

The fi­nance min­is­ter an­nounced tax con­ces­sions worth a monthly Rs.1.5 bil­lion on Wed­nes­day to re­duce the cost of liv­ing and boost con­sump­tion.

Top mo­bile ser­vices provider Di­a­log Ax­i­ata dropped 3 per­cent, while listed pri­vate lender Hat­ton Na­tional Bank fell 1.8 per­cent.

Fi­nance Min­is­ter Man­gala Sa­ma­raweera an­nounced on Wed­nes­day tax con­ces­sions worth a monthly Rs.1.5 bil­lion.

The ru­pee has slipped 2.7 per­cent so far this year.

“The en­tity en­tered into this trans­ac­tion in or­der to com­ply with the min­i­mum pub­lic hold­ing re­quire­ment of Soft­logic Life In­sur­ance PLC in terms of Rule 7.13.1 of the List­ing Rules of the Colombo Stock Ex­change,” Soft­logic Cap­i­tal said in a stock mar­ket fil­ing.

The shares were di­vested at Rs.20.70 per share. The share closed at Rs.21.10, yes­ter­day. As at Septem­ber 30, 2017, Soft­logic Life’s net as­set per share stood at Rs.5.84. The com­pany has 375 mil­lion shares in is­sue.

As per the same date, the com­pany had 375 mil­lion shares in is­sue with a free float of only 2.77 per­cent.

The con­sumer goods seg­ment rev­enue fell 3.4 per­cent YOY to Rs.4 bil­lion due to higher do­mes­tic in­fla­tion and slow­ing con­sumer de­mand ac­cord­ing to BRS, while the leisure, travel and avi­a­tion seg­ment rev­enue fell 16.6 per­cent YOY to Rs.892.5 mil­lion.

Group cost of sales ac­cel­er­ated by 9.6 per­cent YOY to Rs.7.3 bil­lion re­sult­ing in gross prof­its in­creas­ing 6.9 per­cent YOY to Rs.4.4 bil­lion. Ad­min­is­tra­tive ex­penses in­creased 13.7 per­cent YOY to Rs.2.1 bil­lion.

The group as­set base at end2q18 ex­panded to Rs.47.9 bil­lion com­pared to Rs.47.3 bil­lion at the start of the fi­nan­cial year, due to the group’s leisure arm pur­chas­ing a bou­tique villa brand and in­vest­ments into ex­pan­sions in the group’s lo­gis­tics and health­care sec­tors.

To­tal in­ter­est-bear­ing bor­row­ings in­creased to Rs.4.9 bil­lion in the same pe­riod, from Rs.4 bil­lion.

Mean­while, dur­ing the first half of the 2018 fi­nan­cial year, He­mas’ net prof­its fell 8 per­cent YOY to Rs.1.4 bil­lion, while rev­enue in­creased 11.6 per­cent YOY to Rs.23 bil­lion and cost of sales in­creased 13.2 per­cent YOY to Rs.14.4 bil­lion.

The sec­ond half of the year too will re­main chal­leng­ing for He­mas.

“The over­all busi­ness en­vi­ron­ment ap­pears chal­leng­ing for the sec­ond half of the year. We have de­vel­oped plans to drive im­proved prof­itabil­ity and ad­dress ar­eas of weaker per­for­mance iden­ti­fied dur­ing the pe­riod to Septem­ber 30, 2017,” He­mas Group CEO Steven En­derby said.

The Es­u­fally fam­ily owns just over 64 per­cent of shares in He­mas both di­rectly and in­di­rectly, shed­ding a neg­li­gi­ble por­tion of their hold­ings com­pared to a year ago.

The Franklin Tem­ple­ton In­vest­ment Funds owns 7.78 per­cent of the shares in He­mas, down from 9.11 per­cent YOY.

A new en­trant to the top 20 share­holder list dur­ing the year was Norges Bank, now own­ing nearly 3 per­cent of the shares in He­mas.

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