Fitch upholds Dialog’s ‘AAA(lka)’ / Stable

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Sri Lanka’s Dialog Axiata recently retained its Fitch-assigned national long term rating at “AAA(lka)” with stable outlook. Additionally, its cumulative redeemable preference shares were also maintained at “AA+(lka).”

According to an accompanying Rating Action and Commentary (RAC) issued by Fitch, these ratings were a result of “support from its 83% shareholder Axiata Group Berhad (Axiata), underpinned by the latter’s board representation in Dialog, a common brand, and the integration of strategic and some operational functions between the two companies. Axiata has provided tangible support to Dialog throughout its history, most recently in the form of shareholder loan and a corporate guarantee on a long-term offshore bank credit line.”

Further suggested by the RAC, “Dialog’s ‘AAA(lka)’ rating may face downward pressure if Axiata’s perceived willingness to support diminishes, evidence of which would include a considerable dilution in its ownership stake or control, or a material reduction in other operational and strategic ties.” However, also opined was that the “removal of Axiata’s corporate guarantee on the offshore bank line or the repayment of the shareholder loan will not by themselves result in a downgrade.”

At the same time, the RAC also revealed that the mobile operator had a “standalone profile at ‘AA(lka)’, underpinned by its leading market share in the local mobile industry (38% share at end-June 2011), growing diversity in revenues, comfortable operating profit margins, and continuous investments to maintain its technological edge.”

The RAC also highlighted that “Dialog’s revenue and [Earnings Before Interest, Taxation. Depreciation and Amortisation, EBITDA] growth slowed in [the first half of 2011, H111] to 9% and 2% respectively, largely on account of tariff adjustments within the mobile segment in [the first quarter of 2011] (66% of group revenue).” However, it was further predicted that revenues would “rebound in H211, as increased demand should more than compensate for lower tariffs.”

It was also Fitch’s expectation that the mobile operator would “generate positive free cash flow (FCF, after deducting capex and dividends) over the medium term, helped by strong operating cash flow generation and selective capital expenditure.”

Also emerging, “Dialog’s liquidity was comfortable at end-H111, with cash reserves of Rs. 8.4 billion and committed unutilised credit lines of around Rs. 6 billion, compared with current maturities of Rs. 9.8 billion. At end-H111, the share of group debt denominated in US$ stood at 65%. However foreign currency risk was limited by a natural hedge in the form of approximately US$ 50 million of annual net operating income and US dollar cash reserves of US$ 10 million at end-H111.”

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UN HR Rapporteur denied access to Sri Lanka since June 2009

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UN HR Rapporteur denied access to Sri Lanka since June 2009

By Jagdish Hathiramani

The Internet is the “key means by which individuals can exercise their right to freedom of opinion and expression, as guaranteed by article 19 of the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights,” according to a report by the United Nations Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression, Frank La Rue, which was submitted to the body’s Human Rights Council recently.

The report identified Sri Lanka, part of a group comprising Iran, Tunisia and Venezuela, as a country to which the Special Rapporteur had made a visit request which is still pending from June 2009.

Also noted in the report, freedom of opinion and expression was an “‘enabler’ of other rights, including economic, social and cultural rights, such as the right to education and the right to take part in cultural life and to enjoy the benefits of scientific progress and its applications, as well as civil and political rights, such as the rights to freedom of association and assembly. Thus, by acting as a catalyst for individuals to exercise their right to freedom of opinion and expression, the Internet also facilitates the realisation of a range of other human rights.”

It also added that, with “the advent of Web 2.0 services, or intermediary platforms that facilitate participatory information sharing and collaboration in the creation of content, individuals are no longer passive recipients, but also active publishers of information. Such platforms are particularly valuable in countries where there is no independent media, as they enable individuals to share critical views and to find objective information.”

Further, concern was expressed about emerging trends in limiting, or even outright blocking, access to the Internet and a statement was made that the “distinctive features of the Internet that enable individuals to disseminate information in ‘real time’ and to mobilise people has also created fear amongst governments and the powerful. This has led to increased restrictions on the Internet through the use of increasingly sophisticated technologies to block content, monitor and identify activists and critics, criminalisation of legitimate expression, and adoption of restrictive legislation to justify such measures.”

While accepting that there were some, often exceptional, situations where blocking websites, etc. was warranted, such as to curb child pornography, the report also noted that “in many instances, states restrict, control, manipulate and censor content disseminated via the Internet without any legal basis, or on the basis of broad and ambiguous laws, without justifying the purpose of such actions; and / or in a manner that is clearly unnecessary and / or disproportionate to achieving the intended aim.”

Further, that “due to the unique characteristics of the Internet, regulations or restrictions which may be deemed legitimate and proportionate for traditional media are often not so with regard to the Internet. For example, in cases of defamation of individuals’ reputation, given the ability of the individual concerned to exercise his / her right of reply instantly to restore the harm caused, the types of sanctions that are applied to offline defamation may be unnecessary or disproportionate… Similarly, while the protection of children from inappropriate content may constitute a legitimate aim, the availability of software filters that parents and school authorities can use to control access to certain content renders action by the government such as blocking less necessary, and difficult to justify.”

It also suggested that “restriction on the right of individuals to express themselves through the Internet can take various forms, from technical measures to prevent access to certain content, such as blocking and filtering, to inadequate guarantees of the right to privacy and protection of personal data, which inhibit the dissemination of opinions and information. The Special Rapporteur is of the view that the arbitrary use of criminal law to sanction legitimate expression constitutes one of the gravest forms of restriction to the right, as it not only creates a ‘chilling effect’, but also leads to other human rights violations, such as arbitrary detention and torture and other forms of cruel, inhuman or degrading treatment or punishment.”

Also added, “specific conditions that justify blocking are not established in law, or are provided by law but in an overly broad and vague manner, which risks content being blocked arbitrarily and excessively.” In addition, “even where justification is provided, blocking measures constitute an unnecessary or disproportionate means to achieve the purported aim, as they are often not sufficiently targeted and render a wide range of content inaccessible beyond that which has been deemed illegal.”

The report also opined that “types of action taken by states to limit the dissemination of content online not only include measures to prevent information from reaching the end-user, but also direct targeting of those who seek, receive and impart politically sensitive information via the Internet. Physically silencing criticism or dissent through arbitrary arrests and detention, enforced disappearance, harassment and intimidation is an old phenomenon, and also applies to Internet users… Such actions are often aimed not only to silence legitimate expression, but also to intimidate a population to push its members towards self-censorship.”

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EFutures develops online ‘Wish List’ for Mattel

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Sri Lankan website developer Efutures announced it has developed a web-based “Wish List” for toymaker Mattel, a global giant well known for its Barbie, Fisher Price, Hot Wheels and Matchbox brands.

According to its announcement, the solution it has developed for Mattel “allows users to bring family and friends on to the online Wish List fun by sharing what toys they know that their kids love. You can also recommend Wish Lists to other friends that may be toying with the idea of what to buy their kids.

The solution allows you to search for toys and it is the perfect place to store reviews and share among other fun loving parents. Resident experts reveal how to budget for the best toys, make the most of the sales, what to consider when buying for certain ages and provide real parents’ insights on what kids love.”

Meanwhile, the company also revealed that, closer to home; it had “won the development of Sri Lanka Insurance Corporation’s web portal and also recently launched the first phase of the web solution for LOLC.” Additionally, it indicated the Colombo Stock Exchange, Board of Investment, SriLankan airlines, Lanka ORIX Leasing Company, National Savings Bank, People’s Bank, Seylan Bank and John Keells Holdings as local clients.

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New Samsung aircons target 10% of market in 2010

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International consumer electronics giant Samsung recently announced it was launching its “Crystal” and “Max” range of split air conditioners in Sri Lanka with a stated goal of achieving a 10% market share in the country by year’s end.

Available through a network of 350 dealers through distributors Soft Logic, Singer and Singhagiri, the air conditioners are priced at Rs. 77,399 for the AS122USB (12000 BTU), Rs. 92,399 for the AS182SSB (18000 BTU), and Rs. 120,399 for AS 242USB (24000 BU).

Additionally, it was noted that the AS122USB features the S-UTRTM compressor which is “designed to provide stable operation even during voltage fluctuation and the highest temperature”; while “the Crystal series of Samsung air conditioners is stabilizer free. Samsung’s S-UTR compressor has enhanced the capability of the protector to endure electrical unstable condition.”

It was also suggested that “harmful substances in the air including microscopic viruses and unpleasant odours are eliminated with Samsung’s anti-virus and unique Catechin and Deodourising twin filters.”

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Samsung targets 25% smart phone share locally by end 2010

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International consumer electronics and mobile phone maker Samsung this week announced what it said was its “first foray” into smart phones in Sri Lanka, indicating that it was confident it could secure 25% market share in this segment by year’s end. This is for a segment that it estimates makes up 3% to 5% of the overall mobile phones sold locally and which analysts forecast will grow 22% annually until 2013.

Speaking on behalf of US$ 116.8 billion turnover Samsung, Country Manager Shankar Narayan also told reporters that plans were in place to grow local distribution from 600 stores currently to more than 1,000 by the end of 2010. This is in addition to adding service centres in Ratnapura, Anuradhapura and Polonnaruwa to expand after sales service to the North and East. All of which also puts into the company’s reach a sales target equal to 20% of market share for all mobile phones. He also revealed that Samsung presently had 30 models available in this country and was the leader in the local touch screen and dual SIM areas of mobile phones sales.

Meanwhile, two models introduced on Wednesday, Samsung Wave, priced at Rs. 55,000 (offering 1 GHz CPU, 2 GB internal memory and 5 mega pixel camera), and Samsung Galaxy S, at Rs. 75,000 (offering 1 GHz CPU, 16 GB internal memory and 5 mega pixel camera), were also noted as being the first local offerings of Samsung’s proprietary Bada operating system and Google’s Android platform.

Additionally, Mr. Narayan also revealed that two more, much cheaper (below Rs. 50,000) Bada-based models would also be launched locally very soon. He noted that this would be in a market where the majority of smart phones were typically priced over Rs. 100,000.

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Sunshine Holdings records 25% 1Q10 revenue hike

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Sri Lanka’s diversified Sunshine Holdings, parent of Watawala Plantations, recently announced that its revenue for the first quarter 2010/2011 was Rs. 2.5 billion, a 25% increase over the corresponding period of last year. With this revenue hike being mainly driven by growth in the plantations and health care sectors which witnessed revenues increasing to Rs. 1.44 billion and Rs. 992.6 million, respectively, over the corresponding quarter of the 2009/2010 financial year. The group also comprises packaging, travel and power generation companies.

Additionally, while the profit before taxes was Rs.287.2 million, an increase of 92% compared to last year, the “profit attributable to the shareholders of Sunshine Holdings PLC, increased by a noteworthy 52 per cent to Rs 116.3 Million, the company said in a filing with the Colombo Stock Exchange”. At the same time, after tax profits in the healthcare and plantations sectors increased by 31% and 296% respectively.

Meanwhile, Sunshine Holdings Chairman Rienzie Wijetilleke, elaborating on the group performance, noted that its presence in all major sectors of healthcare, namely pharmaceuticals, surgical and medical devices, diagnostics and nutraceuticals, allowed them to maintain market share overall with growth further augmented with “gross margin improvement, tight cost controls and effective management of working capital”.

He also added that plantation sector performance was “driven by higher tea production which increased by 16 per cent over that of the corresponding quarter and better prices” while palm oil and the Fast Moving Consumer Goods segment of the plantation sector also contributed. He also noted that the packaging sector “posted good growth with turnover increasing by 161 per cent to Rs 58.7 Million”; also suggesting that, looking ahead; “Overall, the group anticipates a sustained increase in business volumes across all key sectors and expects sharp comparative earnings growth from the plantation and health sectors over the next nine months.”

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DMS supplies real time loyalty card issuing to Arpico

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Sri Lankan IT systems company Data Management Systems (DMS) recently said that it had supplied a desktop card issuance system, created by Datacard USA, that can, in less than five seconds, print up an Arpico Privilege loyalty card; a customer reward by the local retailer of the same name.

According to a statement by the IT company, the 33-year old DMS, along with long time supplier, financial and mobile SIM card manufacturer Datacard, control 80% of the Sri Lanka’s market in the financial card and secure ID personalisation sectors. Further, “Datacard solutions are used worldwide everyday to produce, personalise and deliver more than 10 million cards, personalise more than 4.7 million smart cards and personalise more than 25,000 passports in 14 countries”.

Meanwhile, the solution provided for Arpico Supercentres “personalises the loyalty card as and when issued”, showing customer details including name, customer number, validity period as well as other information.

Additionally it has been suggested that all cards will be produced at an in-store counter, “allowing customers to get their personalised loyalty card instantly”. Also, this product, which is indicated to be “tamper proof and difficult to reproduce by a third party”, offers “very low cost of production and [no] cost for delivery and postage as in the conventional method” while at the same time increases customer satisfaction due to no waiting time for loyalty cards.

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ODEL recovery backed by strong financials

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Sri Lankan luxury retailer ODEL recently released its financials for the first three months of its financial year ending in 2011, where it recorded significant growth over the same period last year. The issuing of company results also coincided with ODEL shares beginning trading this week on the Colombo Stock Exchange, where it experienced a high of Rs. 38.50.

Showing an increase in sales of 62%, to Rs. 692 million, while the cost of sales rose far less, at just 55% or Rs. 427.8 million; the local 13-store chain also recorded a steep increase in profitability equaling 199%, to Rs. 37 million, over the same period in the last financial year.

The interim report additionally noted a 77% hike in distribution costs, to Rs. 40.4 million; a 56% rise in administrative costs, to Rs. 160 million; and a 17% fall in finance costs, to Rs. 21.5 million. Commenting on her company’s performance, Chief Executive Otara Gunewardene suggested “higher tourist arrivals, efforts to make the brand more accessible to local consumers and a focused consolidation of business operations had contributed to the growth”.

She also revealed; “Same store sales showed considerable growth year-on-year while the newly opened stores at Mount Lavinia, Moratuwa, Panadura and Maharagama performed above expectations. With the anticipated surge in tourist arrivals as well as a continued increase in local consumer demand, we are confident we will see strong growth going forward”.

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Carsons first quarter 2011 net profit down 12% to Rs. 1,187 mln

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Recent financials of Sri Lankan investment and palm oil plantations focused Carsons Cumberbatch have revealed that the group has experienced a 12% year-on-year drop in its first quarter 2011 net profit, to Rs. 1,187 million.

However, total revenues for the group increased year-on-year to Rs. 8.7 billion for the first quarter of the 2011 financial year, comprising the three months which ended on June 30, 2010, from Rs. 5.9 billion in 2009; apparently due to increases in total revenue figures across all segments of its diversified business holdings (investment holdings, oil palm plantations, beverage, real estate, hotels and management services) except for one, airlines.

Further, segmental analysis shows revenues in Carson’s investment holdings and real estate businesses have yielded the best results by more than doubling even though revenues from the group’s typically highest earner, palm oil plantations, was virtually stagnant compared to the same quarter of 2009.

Although the group’s after tax profits marginally dropped compared to the same period last year, which has occurred for the third year in a row; on a segmental basis, profitability in virtually all the group’s businesses improved except for palm oil plantations and airlines. While after tax profits in beverages ballooned from Rs. 77 million, for the three months ended June 30, 2009, to Rs. 271 million in the same period of 2010.

Additionally, according to financials, the market value per ordinary share in this quarter, the first of the company’s financial year ending 2011, was at an average of Rs. 545.00. This is in comparison to Rs. 181.50 for the same ordinary share during the same period of its last financial year.

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SL exports down 12% in 2009, $2.7 billion in first quarter 2010

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Sri Lankan exports declined in 2009 by 12.7% to US$ 7 billion. However, in the first four months of this year, exports were US$2.7 billion; with sectors such as tea, rubber, gems and jewelry and spices picking up, while garments dropped 10% over the same period last year, according to the country’s Minister of Industry and Commerce, Rishad Bathiudeen.

Mr. Bathiudeen also opined that, if the country could produce reasonably priced goods, it could grow its share in its existing markets as well as even making in-roads into new markets. However, he also added that issues with power and delays in refunding Value Added Tax (VAT) to exporters were affecting efficiencies. In playing his part, he suggested that his ministry would attempt to rectify the situation with VAT delays but was unable to do anything presently about the power issues. Additionally, he further noted that the government believed in the liberalisation of markets and, as such, increasing market access brought upon by the Doha round of the World Trade Organisation.

Mr. Bathiudeen’s comments were made at the 13th Annual General Meeting of the Exporters Association of Sri Lanka, where he, along with Deputy Minister of Finance, Dr. Sarath Amunugama, was a chief guest. He also noted that this 1,000 member strong apex body represented 80% of all Sri Lankan exports.

Meanwhile, Dr. Amunugama highlighted tea and agriculture, and especially paddy production and agriculture in the North and East, and garments as the key components for the government’s planned double-digit growth efforts. He also mentioned that, while in the past the value of the Sri Lankan rupee had to be propped up against devaluation, now the rupee had to be carefully controlled to stave off overvaluation. Additionally, Sri Lanka’s emphasis on the power sector meant that the country would never again face power shedding (cuts).

Dr. Amunugama also revealed that, even though import duties on certain products had been reduced recently, overall revenues had increased. Additionally, local banks were also benefitting from unprecedented credit ratios. He further indicated that these banks must be pressured into putting this liquidity to good use by facilitating better credit to the private sector. Noting that the country’s tourism (currently at US$500 million approximately), gem and jewelry (US$ 500 million) and IT (US$ 600 million) sectors all had the potential to easily double, he also suggested that the country had to expand stock market operations.

In the mean time, re-elected EASL Chairperson Nirmali Samaratunga noted the largest contraction in exports was 14% in the industrial sector. She also indicated that the exporters were still being impacted by the economic downturn of 2008 and 2009. As such, she requested that the country’s Central Bank continue its intervention to keep the value of the rupee stable. She further also suggested that more options be provided rather than just the major source of funding being bank loans, while at the same time noting that small and medium enterprises were finding a lack of access to finance to be a serious concern.

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