In Economic news:

In Business news: In Consumer news:• Tourist arrivals in Feb 14 continued its impressive growth, rising 24.5% YoY to 141,878, as core markets East Asia, India and Western Europe increased traffic

• Vehicle registrations were down 2.7% YoY in Feb 14 to 23,130 as three wheelers numbers come in at a 32 month low

• Sri Lanka’s tea export volumes in Jan 14 dropped 1.0% YoY causing export earnings to decline to Rs.16.2bn. However production volumes increased 9.6% YoY to 25.4m kg.

• Trade deficit in Jan 14 narrows to $755.9m (-5.9% YoY) as exports increase to $898.0m and imports reach $1.6bn.

• LMD-Nielsen Business Confidence Index drops to 124 in Feb 14 (-15 points MoM).

Monthly Bul let in : March 2014

• Sri Lanka’s economy grows 7.3% in 2013 with fourth quarter 2013 rising 8.2% YoY, as industrial and services sectors make solid contributions

• BOI says investment amounting to $3.6bn approved in 2013 with domestic investments accounting for $1.3bn

• Thermal electricity generation increases as rains continue to fail resulting in about Rs.24bn in losses during Jan- Mar 14

• Sri Lanka’s issue of $60m development bonds oversubscribed 3.1 times

• As unsolicited project approvals come to the lime light Sri Lanka Port Authority forced to defend itself, issues clarification

• “Job retrenchment unavoidable” in Sri Lanka’s banking and finance sector consolidation, industry professionals say

• Private sector credit growth in Jan 14 was just 5.2% YoY as interest rate cuts clearly fail to filter; while government borrowing rose a staggering 26.0% YoY to Rs.1,369.7bn

• Inflation remained at 4.2% YoY in Mar 14 (0bps MoM) a 23 month low

• The rupee ended the month at 129.29/132.17 vs. USD (rupee stronger ~0.23% MoM)

• The All Share Price Index closed at 5,968.31, up 0.47% MoM

• Sri Lankan operations hurt Fonterra results, as local sales volumes drop 33% YoY

• Nielsen Consumer Confidence Index in Feb 14 reduces to 65 (-4pts from Jan 14) as those responding “Not so good” to “How do you think the next 12 months will be for people to buy the things they need” , rise 15%

GradientAlliance

GDP GROWTH

2014E 8.2%

7.3%

2

In Economic news:

Monthly Bul let in : March 2014

Sri Lanka’s economy grows 7.3% in 2013. Department of Census and Statistics of Sri Lanka reported that the Sri Lankan economy grew 7.3% year over year (YoY) in 2013. Growth was in-line with Central Bank of Sri Lanka (CBSL)’s revised forecast of 7.2-7.3% (Nov 13) but ahead of all other external institutions’ forecast. GDP in the fourth quarter of 2013 grew an impressive 8.2% YoY on strong industrial (+10.7%), agriculture (+10.4%) and services sector (+6.5%) growth.

For full year 2013, the industrial sector (~30% of GDP) comprising mainly of textiles and garments, construction and manufacturing grew 9.9% YoY (vs.10.3% YoY in 2012), driven by construction (+14.4% YoY) and mining (+11.5% YoY).

GradientAlliance

Services sector (~59% of GDP) of trade, tourism, transport, financial services etc. grew 6.4% YoY (vs. 4.6% in 2012). Underlining the strength of the tourism industry, hotels and restaurant grew a staggering 22.3% YoY. However its contribution to the overall economy still remains at a low of around 0.8% of GDP.

Agriculture sector grew a sedate 4.7% YoY (vs. 5.2% YoY in 2012) with paddy cultivation growing 19.5% offsetting decline in coconut (-16.1%) and rubber (-9.1%) crops.

Agriculture sector’s contribution to GDP continued to decline and is now is only 10.8% of GDP with GDP per agriculture sector worker continuing to underperform the national average. The low sector contribution is despite government incentive schemes such as fertiliser subsidies (Rs.60bn in 2012 for paddy), guaranteed prices for selected crops, low interest loans etc. The government is compelled to offer such substantial support as the sector employs about 31% of the country’s workforce.

Source: Department of Census and Statistics

Source: Department of Census and Statistics

Industrial

8 0%

10.0%

12.0%GDP Year over Year (%)

Agriculture

Services

National average

0.0%

2.0%

4.0%

6.0%

8.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Industrial

Services

410 000

460,000

510,000

560,000 GDP per worker by sector (Rs.)

Agriculture

National average

110,000

160,000

210,000

260,000

310,000

360,000

410,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

2.5%

3.0%

3.5%

2,000

2,500

Foreign Direct Investment FDI $m FDI/GDP

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

0

500

1,000

1,500

2007 2008 2009 2010 2011 2012 2013E

Investment up as BOI tax breaks works. According to Mr. Lakshman Jayaweera, Chairman, Board of Investment (BOI), $3.6bn worth of investment projects had been approved in 2013. Infrastructure and mix development, tourism and construction were the clearly favoured sectors, with almost $1.3bn of the projects coming from domestic investors.

He stated that”I find that local investors are coming very actively now signing agreements with the BOI. The agreements that we signed will not come everything this year. It will come stage by stage. We target over two billion US dollar worth of investment will come this year”. Actual Foreign Direct Investment (FDI) flows during Jan to Nov 13 were only about $1.3bn.

Moreover, BOI stated that 12 projects presented at the 2013 Commonwealth Heads of Government Meeting (CHOGM) held in

Source: CBSL and Gradient analysis

Colombo had received keen investor interest and that two preliminary agreements had been signed. The two projects amounting to $550m are to establish transit hotels, parking facilities and shopping complexes at the Katunayaka and Mattala airports. Both projects were awarded to China Harbour Engineering Company.

3

In Economic news:Thermal electricity generation increases as rains continue to fail. According to Mr. Shavindranath Fernando, General Manager, Ceylon Electricity Board (CEB) water levels at reservoirs used for hydro

power generation had reduced to a low of 26%. Moreover ,The Sunday Times newspaper quoting a letter written by Mr. Fernando said that the current high reliance on thermal power had caused the CEB to lose as much as Rs.24.0bn during Jan-Mar 14. In a bid to curtail losses the CEB was reportedly seeking “more liquidity” and is tightening on overdues from customers, especially the state institutions.

According to CEB’s power generation mix as at 30th March 2014, only 4.4Gwh (14.3%) were generated from hydro, whereas 26.3Gwh (85.3%) were from thermal (including coal) and 0.1Gwh (0.4%) from wind.

Mr. Fernando further stated thatthe “The total hydro power capacity of the CEB is 1,257 Gwh and it has now come down to 328.3 Gwh and is further declining by 4.51 Gwh per day. No significant rain has been reported in the

Monthly Bul let in : March 2014

GradientAlliance

Sri Lanka issues another batch of development bonds. Sri Lanka issued $60m of Sri Lanka Development Bonds (SLDB) at 4.3318%, 400 bps higher than US dollar six month LIBOR rate. The issue was oversubscribed 3.1 times with the CBSL accepting all the bids ($187m).

Unsolicited project approvals come to the lime light. Sri Lanka Port Authority (SLPA) had to defend itself over the unsolicited awarding of the $1.3bn Colombo Port City project. Moreover it was revealed that the contract

had been awarded to the World Bank blacklisted China Communication Construction Co. Ltd (CCCC). These revelations caused an uproar in parliament, with opposition legislator Mr. Eran Wickramaratne stating that as many as 45 projects were approved during a 45 minute cabinet

meeting.

The Colombo Port City is to be built on 233 hectares of reclaimed land off the coast of the Galle Face Green in Colombo. It will have offices, luxury hotels, apartment complexes, shopping malls etc. SLPA said that the project is not funded by the Sri Lankan government or the SLPA and issued a statement clarifying its position, stating that;

catchment areas of the reservoirs. There will be no power cuts and we expect rain to start soon”. According to industry sources the unit cost of thermal power is ~Rs.24.00, coal power ~Rs.6.50-7.00 and hydro power ~ R s . 1 . 5 0 . H i g h e r reliance on thermal power generation has led to Sri Lanka’s electricity tariffs being among the highest in Asia.

On a separate note a deputy secretary of the Treasury, speaking to Adaderana Biz , stated that the Finance Ministry is encouraging the CEB, Ceylon Petroleum Corporation (CPC), the National Water Supply and Drainage Board (NWS&DB) to obtain international credit ratings. He stated that “Our aim is to push these state institutions to obtain international credit ratings. Then they have to maintain these institutions as profit making ventures”.

Hydro4.4

14.3%

Wind0.1

0.3%

Power generation mix (Gwh,%), 30th March 2014

Thermal 26.3

85.4%

Source: CEB

• As per an unsolicited proposal forwarded by M/S China Harbour Engineering Company Ltd; a partnership of the CCCC which falls under Fortune 500 Companies of the world, has been granted permission to develop the Colombo Port City Project.

• Proposal was primarily submitted for Standing Cabinet Appointed Review Committee (SCARC) through the Department of Public Finance for approval. On instructions by the SCARC, SLPA also entered into a MoU with CCCC and obtained the detail proposal which was expressed at the Technical Evaluation Committee appointed by SLPA to evaluate the project proposal. The final approval has been granted thereafter, subjected to the agreement by the Attorney General.

• SLPA responsibly states that it is totally irresponsible for anyone to state that this is a hidden project implementation in Sri Lanka

Mr. Wickramaratne alleged that almost $5bn worth of unsolicited contracts have been awarded by the government in contravention of the Ministry of Finance circulars 444 and 444/1 which states that the government should make no decisions on unsolicited proposals except with cabinet approval in exceptional circumstances. He noted that “But unsolicited proposals are the norm rather than the exception today. This means that the Sri Lankan taxpayer is denied the benefit of companies competing for Government projects and quoting the best prices”.

4

In Economic news:

Monthly Bul let in : March 2014

GradientAlliance

Job retrenchment unavoidable in Sri Lanka’s banking and finance sector consolidation. According to Mr. Aravinda Perera, Managing Director, Sampath Bank and President, Association of Professional Bankers of Sri Lanka the CBSL led consolidation of the banking and finance sector is to cause loss of

Dr. Chandana Aluthge, senior lecturer at Department of Economics at the University of Colombo also speaking at the forum stated

jobs and streamlining of costs. CBSL proposes to reduce the number of Non-Banking Financial Institutions (NBFI) to about 20 from the current 58 to better regulate the industry following high profile structural issues at a few NBFI’s.Speaking at a forum organised by the Sri Lanka Economic Association to discuss the initiative Mr. Aravinda Perera stated;

“We’ve talked about not having to retrench and having a very low unemployment ratio in the country, and the political reality is such that this cannot be changed but the private sector reality is that when two entities merge there will be many positions that will be duplicated, therefore retrenchment is the only way.

“NDB, DFCC and Vardhana have three CEOs and the reality is after the merger there can only be one, that cannot be avoided.Cost efficiency is already a problem in terms of the Non-Banking Finance Institution sector, and if we can’t retrench jobs in the sector that it will take a long period of time,”

“Many people retire from our organizations every year, so it’s a question of two years that you will have to ease on recruitment. Many of the people who retire from the banking sector go on to be consultants at NBFIs and while these people should be allowed that route, there will likely be some redistribution there as well but in a few years I believe we can achieve cost efficiency”.

“The condition of no retrenchment advanced by the Central Bank seems a bit artificial. A bigger institution does not necessarily mean a stronger one and there are many complex questions related to efficiency and cost structures and salaries that must be explored carefully.

“While I support reform and consolidation, the implication of this process is that the entities that we have now are not strong enough and the point of this process is to make them stronger by making them more efficient,”

“Given the complexity of such a drastic reorganization within the banking and NBFI sector, rushing to consolidate the sector in an oversimplified manner, could trigger a larger-scale crisis in the sector.”

• Merchant Bank of Sri Lanka, a unit of state-run Bank of Ceylon is merging with its subsidiaries, MBSL Savings Bank Limited and MCSL Financial Services Ltd.

• According to Union Bank of Colombo it is in talks with TGP Asia VI L.P, for a possible sale of shares. The bank had received a “non-binding indicative term sheet governing further negotiations” over a share sale from TGP Asia.

• According to a research report by Capital Alliance (CAL), 4Q13 profits at commercial banks reduced by about 16% YoY mainly due to losses in the gold loan portfolio as world gold prices continued to be volatile. It

In related banking and finance news Source: CBSL

7 5%

8.5%

9.5%

10.5%Inflation YoY%

Sri Lanka

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

reported that the loan loss charge had risen to Rs.4.7bn in fourth quarter up from Rs.3.5bn a year earlier. Despite the loan portfolio rising 16.0% YoY net interest margin had decreased to 4.4% (-30bps YoY).

• In a joint stock exchange filing, the board of directors of DFCC Bank and NDB Bank stated they have signed a Memorandum of Understanding (MoU) to explore the possibility of merging. It stated that the MoU was only an initial step to look at the possibility of combining the two banks and that a ‘definite decision on any aspect of such consolidation’ had not been taken.

5

In Economic news:

Monthly Bul let in : March 2014

GradientAlliance

Trade deficit in Jan 2014 narrows to $755.9m (-5.9% YoY). As per the CBSL exports in Jan 14 rose a significant 23.2% YoY to $898.0m with imports rising 7.9% YoY to $1.6bn. The

r e s u l t i n g trade deficit of $755.9m was financed by $555.5m of worker re m i t t a n c e s and $161.2m of tourism earnings.

• Agriculture exports (~22% of exports)

were $203.2m, up 21.6% YoY mainly driven by tea exports of $116.1m (+14.9% YoY). Industrial exports (~77% of exports) were $691.6m up 23.6% YoY on impressive apparel exports to the European Union and the United States ($412.0m,+23.4% YoY).

• Consumer goods imports (~18% of imports) were $253.6m, up 2.7% YoY, with growth in other consumer goods $143.7m (+8.4% YoY) offsetting decline in food & beverage imports, $109.9m (-3.8% YoY).

Government borrowing continue to increase.Government borrowing in Jan 14 reached Rs.1,369.7bn up a significant 26.0% YoY and now accounts for 32.5% of the total net credit granted. Reduction in tax revenue has compelled the government to keep borrowing to sustain its heavy expenditure.

Source: CBSL

9 000

10,000 Trade Deficit ($m)

2011

3 000

4,000

5,000

6,000

7,000

8,000

9,0002012

2013

-

1,000

2,000

3,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Private sector credit growth slumped to 5.2%YoY Jan 14, a historic low, with total private sector borrowings reaching Rs.2,491.6bn. Month over month private credit contracted by Rs.42.7bn the first since thebalance of payments crisis in 2011. Private sector credit growth is still to respond to government stimulants over the last several months including a reduction in the main interest rate.

• Intermediate goods imports were $1.0bn, up 22.3% YoY, as fuel imports rose to a crushing $489.6m (+68.1% YoY). This was mainly due to the increase in imports of refined petroleum products (+85.4%) and coal (+79.4%) as low rain fall increased dependence on thermal and coal power generation.

• Investment goods imports were $366.3m, down, 16.8 % YoY; on reduction in imports of machinery & equipment, $196.9m (-21.3% YoY) and building materials, $121.9m (-11.0%YoY).

On a separate note, Dr. P.B Jayasundera, Treasury Secretary stated that Sri Lanka and China had finalised a joint feasibility study on the Free Trade Agreement (FTA) between the two countries. He mentioned that the proposed FTA would bring substantial economic and trade benefits to both countries while strengthening the friendly relationship that both countries have been maintaining from historical time. Trade between Sri Lanka and China rose to over $3.5bn in 2013 from $1.1bn in 2006.

Source: CBSL

39%

44%

49%

54%

59%

1,150

1,250

1,350

1,450 Net Credit to Government (Rs. bn) YoY%

14%

19%

24%

29%

34%

750

850

950

1,050

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-

12

Aug-12

Sep-12

Oct-

12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-

13

Aug-13

Sep-13

Oct-

13

Nov-13

Dec-13

Jan-14

Source: CBSL

75%

85%

95%

105%

115%

300

350

400Credit to State Corporations (Rs. bn) YoY%

15%

25%

35%

45%

55%

65%

150

200

250

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-

12

Aug-12

Sep-12

Oct-

12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-

13

Aug-13

Sep-13

Oct-

13

Nov-13

Dec-13

Jan-14

Source: CBSL

24%

29%

34%

39%

2 200

2,300

2,400

2,500 Credit to the Private Sector (Rs. bn) YoY%

4%

9%

14%

19%

1,900

2,000

2,100

2,200

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-

12

Aug-12

Sep-12

Oct-

12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-

13

Aug-13

Sep-13

Oct-

13

Nov-13

Dec-13

Jan-14

6

Markets Fluctuate, Intelligence

Remains

Technology Transfer

Infr

astr

uctu

re

Shar

ia C

ompl

iant

�nan

ce

Finance sector

Web solutions

Soci

al R

esea

rch

Real Estate

Market intelligence

Tel: Colombo: +94 112411555 | Kandy:+94 722 741305 | London: +44 7529937337 Email:info@riunit.com | Web:www.riunit.com | CSR:www.cccc.lk

ADVERTISEMENT

7

In Business news:

Monthly Bul let in : March 2014

Inflation remained at 4.2% YoY in Mar 14 (0bps MoM) a 23 month low. The annual average also reduced to 5.7% (-30 bps MoM). CBSL attributed the slow rise in inflation to a moderation in prices of food (0.1% MoM) and non-food categories (0.1% MoM).

The All Share Price Index closed at 5,968.31, up 0.47% MoM. Best performing sectors were oil palms (+15.9% MoM), healthcare (+6.2%) and chemicals & pharmaceuticals (+1.2%). Worst performing sectors were information technology (-8.7%MoM), footwear & textiles (-5.3% ) and investment trusts (-3.3% ).

Key events during the month: • Alumex Limited, the aluminum extrusions maker’s Rs.838m initial public offer (IPO) was oversubscribed. According to the company Rs.250m of the proceeds is to construct a powder coating plant and acquire die manufacturing equipment, doubling its powder coating capacity to 3,600 metric tons per year. The remaining Rs.588m is to existing major shareholders (via offer for sale of vendor shares).

GradientAlliance

Source: CBSL

Source: CBSL

Source: CSE

7 5%

8.5%

9.5%

10.5% Inflation YoY%

Sri Lanka

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

6.5

7.5

130

135

140

USD/LKR Exchange Rate

Mid point (Rs. per US$) Bid - Ask spread (Rs. per US$)

1.5

2.5

3.5

4.5

5.5

105

110

115

120

125

130

Feb-1

2

Mar-

12

Apr-

12

May-1

2

Jun-1

2

Jul-

12

Aug-1

2

Sep-1

2

Oct

-12

Nov-1

2

Dec-

12

Jan-1

3

Feb-1

3

Mar-

13

Apr-

13

May-1

3

Jun-1

3

Jul-

13

Aug-1

3

Sep-1

3

Oct

-13

Nov-1

3

Dec-

13

Jan-1

4

Feb-1

4

Mar-

14

6,463

6,1216 037

6,2486,200

6,500

All Share Price Index

5,972

5,514

5,351

5,643

5,817

5,6365,736

5,9536,037

5,834 5,807

5,955

5,7755,913 5,940 5,968

5,300

5,600

5,900

,

The rupee ended the month at 129.29/132.17 vs. USD (rupee stronger ~0.23% MoM)

• Softlogic Capital (SCAP) announced a 13 for 10 rights issue to raise approximately Rs.1.3bn at Rs.3.40 a share. SCAP notes the proceeds would be utilised to strengthen the balance sheet and pay down select outstanding debt.

• Asiri Central Hospitals Plc (ACH) is to delist at Rs.275 per share.The last traded price of ACH was Rs.250.10. Asiri Hospitals Holdings Plc owns 99.31% of ACH.

• Bansei Royal Resorts Hikkaduwa Limited is to list its 53.7m shares on the secondary board (DiriSavi) through an introduction.

• The Colombo Stock Exchange requested all listed companies to submit their current distribution of shares as at Jan 1st by Mar 31st. This follows the Securities and Exchange Commission directive relating to rules on minimum public float as a continuous listing requirement.

• IFL Holdings of India completed the sale of its 76% stake in the Sri Lankan unit IIFL Securities Ceylon to its joint venture partners.

• Richard Peiris and Company plans to raise Rs.3.5bn through debentures. The offer comprising of 30m rated, unsecured, redeemable debentures has an option to increase the size by another 5m.

8

In Business news:

Monthly Bul let in : March 2014

GradientAlliance

• Russian arrivals grew 91.8% YoY to 9,723, while North America tourist traffic increased to 5,489 from 5,235.

In related tourism news

• Browns Investments increased its holding in LOLC Leisure to 100%, with a 70% acquisition for Rs.2.8bn from Lanka Orix Leasing Company (LOLC). As a result the company now manages about 1,000 rooms.

• Beruwala Walk Inn is to be delisted as it fell short of the 20% minimum public float. Banyan Tree who controls 79.8% of the company said in a stock exchange filing that the company was in need of fresh capital to rebuild the hotel.

• Best Western is partnering with Elyon Hotels to develop about 700 hotel rooms in the country. US based Best Western manages or has franchised 4,000 rooms around the world. The first 60 rooms, a four star hotel is to open by Jun 14, located on the Baseline Road closer to Kirulapone.

Vehicle registrations were down 2.7% YoY in Feb 14. According to JB Securities total vehicle registrations were only 23,130 in Feb14.

• Three wheeler registrations continued to slide, down a significant 20.8%YoY to 5,257 in Feb 14, lowest level since Jun 12. JB Securities notes “The slowdown in more noticeable in Bajaj models, either they have reduced production or there is a significant pull back from the leasing industry for leasing volumes have also dropped.”

• Motor cars registrations were 1,994 up 34.2% YoY. Pre-owned cars increasedto 1,022 units (583 in Feb 13). Premium cars registrations decreased to 75 (vs. 85 in Feb 13). According to JB Securities “Although much publicized we could not find any trace of Lamborghinis registered in the RMV stats, finally in Feb one unit has been registered – Lamborghini Gallardo LP 550”.

• Motor cycle registrations grew to 13,659 (+13.7% YoY).

• Overall truck registrations declined to 1,293 (-38.4% YoY) in Feb 14, with mini trucks (payloads <1 tonnes) reducing to 730 units (a 24 month low) from 1,165 a year earlier.

Tourist arrivals continue its impressive growth. Tourist arrivals in Feb 14 were 141,878 a significant 24.5% increase YoY. According to Sri Lanka Tourism Development Authority (SLTDA);

• East Asia arrivals grew 31.2 %YoY to 25,065; with 10,319 coming from China and Hong Kong (+63.9% YoY).

• Main single market, India grew a strong 21.5% YoY to 17,534

• Traffic from the largest block, Western Europe grew 15.7%YoY, through U.K (14,316,+5.2%YoY), Germany (11,305,+15.6% YoY) and France (10,617,+28.6% YoY)

Source: Sri Lanka Tourism Development Authority

120

140

160

Tourist Arrivals '000' 2013 2014

0

20

40

60

80

100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Commenting on the overall motor vehicle market Mr. Murtaza Jafferjee, CEO, JB Securities noted that “What is puzzling is that we are experiencing low levels of interest rates – SLIBOR is around 8% down from around 12% one year ago translating into lower interest rates on leases but there is no resultant pickup in lease volumes for new vehicles. It goes without saying that government revenues from this sector are taking a hit”.

Source: JB Securities

16,000

18,000

Motor Vehicle Registrations (New/Pre Owned)Motor Cars, SUVs and Vans 3 wheelers 2 wheelers Trucks

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14

9

In Business news:

Monthly Bul let in : March 2014

GradientAlliance

Source: Forbes and Walker

30

35

40

Sri Lanka Tea Production and ExportsTea Production (m kgs) Tea Exports (m kgs)

0

5

10

15

20

25

Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14

Sri Lanka’s tea export volumes in Jan 14 dropped 1.0% YoY. Export volumes reduced to 21.9m kgs(-1.0% YoY) caused export earnings to decline to Rs.16.2bn.However production volumes in Jan 14 increased 9.6% YoY to 25.4m kg.

LMD-Nielsen Business confidence Index drops to 124 in Feb 14 (-15 points MoM). Mr. Shaheen Cader, LMD, Managing Director, is of the view that “while perceptions towards economic growth remained the same as in December, lower optimism seems to be the result of lower-than-expected business volumes in January sales or in the latest company quarterly financial results.”

There was a significant decline in the share of respondents who expect company sales to “get better” over the “next three months” and “12 months”, reducing to 28% from 42% in Jan 14, and to 46% from 57% in Jan 14. The share of respondents who believe the economy will get better in the next 12 months dropped to 34% from 36% Jan 14. Source: LMD

140

150

160

170LMD- Nielsen Business Confidence Index

80

90

100

110

120

130

In related tea news;

• Tea Sale Averages in Feb 14 reached Rs.481.83 (+Rs.59.15 from Feb 13 and Rs.72.19 from Jan 14). According to John Keells PLC “Significant gains have been recorded for the month from Low Grown at 17.4%, Medium Grown at 9.4% and High Grown at 7.5%.

• Strathdon Estate equalled the all-time record price of Rs.480 per kg for its BPS tea. This tea was purchased by Van Rees Ceylon Ltd. and the sale conducted by Forbes & Walker Tea Brokers Ltd.

• Watawala Plantations Plc ended its management agreement with Estate Management Services (Pvt)

For your fresh fruit requirements:Mangoes (Karuthakolumban), Cashew Nuts, Pineapples

– free delivery within city limits

Coconuts – free weekly delivery to restaurants/caterers/hotels

+94777508323fruitmarketlk@gmail.com

www.facebook.com/fruitmarketlk

ADVERTISEMENT

10

Monthly Bul let in : March 2014

Sri Lankan operations hurt Fonterra results. Fonterra took a significant hit to its volume and profits during the six months to Jan 14, following the Sri Lankan government’s decision to temporarily suspend milk power imports during the third quarter of 2013. The suspension was due to the allegation that imported milk powder contained dicyandiamide (DCD). Sri Lanka accounts for 27% of Fonterra’s Asian volumes. Releasing interim financial results;

• Volume growth of 3% was constrained by Sri Lanka business, which was significantly impacted by a temporary suspension of its market operations. Excluding Sri Lanka, volume growth was 10% across Asia.

• Normalized EBIT (earnings before interest and tax) from Asian markets for the six months was US$ 32 million, 68% lower from a year ago on significantly higher dairy commodity prices, negative currency impact and challenging market conditions in Sri Lanka.

• Sales volume in Sri Lanka fell 33%.

Nielsen Consumer Confidence Index in Feb 14 reduced to 65, down four points since Jan 14. The key movement was a 15% increase in those responding “Not so good” to the question “How do you think the next 12 months will be for people to buy the

GradientAlliance

In Consumer news:

things they need”. Moreover, those considering employment prospects to be “Not so good” over the next 12 months also increased to 69% (60% in Jan 14).

Source: http://lmd.lk/2014/03/01/consumer-confidence-4/

11

Gradient AllianceHelping to shape your Business

We are a management consultancy and financial advisory services provider. Combining experience and comprehensive capabilities across many industries and

business functions, we work with clients to achieve a higher level of excellence.We carry out company and market research, developing company financial

models, valuations and competitor analysis. Moreover we perform market surveys, feasibility & due diligences studies and construct business plans.

Mo

n t h

l y

B u

l l e

t i n

: M

arch

201

4

4A, Deal Place A, Colombo 03

Sri LankaM: + 94 773 619800P: + 94 11 5786787

roshaanr@gradientalliance.comwww.gradientalliance.com