Trade deficit widens for fifth consecutive month
External sector performance extracts – July 2021
The deficit in the trade account recorded an expansion on a year-on-year basis in July 2021. Earnings from export of goods increased during the month over a year earlier, but expenditure on imports increased at a faster pace, causing the trade deficit to widen for the fifth consecutive month in July 2021. Workers’ remittances declined in July, following the trend observed in June 2021, while earnings from tourism remained at minimal levels. Meanwhile, maintaining the country’s impeccable record of debt service payments, Sri Lanka successfully settled the matured 10-year International Sovereign Bond (ISB) of US dollars 1.0 billion in July 2021. Foreign investment in the government securities market recorded a marginal net inflow, while the Colombo Stock Exchange (CSE) continued to record net outflows during the month. The average spot exchange rate in the interbank market remained broadly stable in July 2021.
Trade Balance and Terms of Trade
Trade Balance: The deficit in the trade account widened on a year-on-year basis to US dollars 607 million in July 2021 compared to the deficit of US dollars 209 million recorded in July 2020. The cumulative deficit in the trade account from January to July 2021 also widened to US dollars 4,922 million from US dollars 3,471 million in the corresponding period of 2020.
Terms of Trade: Terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 11.6 per cent in July 2021 compared to July 2020, as the increase in import prices surpassed the increase in export prices.
Performance of Merchandise Exports1
Overall exports: Exports performed well in July 2021 despite the ongoing pandemic. Earnings from merchandise exports in July 2021 recorded an increase of 1.7 per cent to US dollars 1,104 million compared to July 2020. Cumulative export earnings from January to July 2021 amounted to US dollars 6,803 million, compared to US dollars 5,498 million recorded in the corresponding period in 2020.
Industrial exports: Earnings from the export of industrial goods increased by 1.1 per cent in July 2021 compared to July 2020. This increase was mainly due to the increase in earnings from export of petroleum products, machinery and mechanical appliances (primarily parts of mechanical appliances and electronic equipment) and rubber products (tyres and gloves). Earnings from the export of petroleum products improved because of the increase in prices and quantities of bunker fuel supplied, as well as the prices of aviation fuel supplied. Among the sectors that recorded a decline in July 2021 over July 2020 were food, beverages and tobacco (mainly miscellaneous food preparations); textiles and garments (mainly face masks); and plastic articles. Export of garments to the EU and UK region declined in July 2021 compared to July 2020, while exports to the USA and other destinations increased.
Agricultural exports: Total earnings from the export of agricultural goods in July 2021 increased by 2.3 per cent compared to July 2020, mainly due to the increase in export earnings from seafood (such as fresh and frozen tuna, fish fillet, shrimps and prawns) and spices (cinnamon, pepper, cloves, nutmeg and mace etc). However, earnings from the export of tea declined significantly, due to a decline in both volume and prices of tea exported. Further, exports of vegetables and minor agricultural products also recorded a drop due to the decline in earnings from lentils and arecanuts, respectively.
Mineral exports: Earnings from mineral exports were lower in July 2021 than in July 2020 by 6.9 per cent due to a decline in export earnings from minerals such as granite, quartz and zirconium ores.
Export indices: The export volume index declined by 4.2 per cent, while the export unit value index increased by 6.1 per cent on a year-on-year basis in July 2021. This indicates that the increase in export earnings, on a year-on-year basis, was due to the increase in export prices that outpaced the decline in export volumes.
Performance of Merchandise Imports
Overall imports: Expenditure on merchandise imports increased by 32.2 per cent to US dollars 1,710 million compared to US dollars 1,294 million recorded in July 2020. The increase in import expenditure was observed across all main categories of imports, namely, consumer goods, intermediate goods and investment goods, despite some import controls still being in place. On a cumulative basis, total import expenditure from January to July 2021 amounted to US dollars 11,725 million, compared to US dollars 8,968 million recorded in the corresponding period in 2020. (CBSL)
Hela Apparel Holdings completes FY 2022/23 with resilience, amidst a challenging operating environment
The fourth quarter of FY 2022/23 marked the close of a challenging year for Hela Apparel Holdings PLC. While revenue of Rs. 20.5 Bn in Q4 represented a 40.6% increase in the same period of the previous year, this was primarily driven by the impact of the rupee depreciation. In US Dollar terms, quarterly revenue declined by 9.6% year-on-year. The drop in US Dollar revenue, however, is smaller than the 19.7% year-on-year decline recorded during Q3, as consumer demand in the Group’s key export markets remained relatively resilient.
The tentative stabilisation in demand conditions during the fourth quarter, alongside the proactive cost control measures taken by the organization contributed to an improvement in profit margins. The Group’s gross profit margin increased to 13.5% in Q4, compared to 10.0% in Q3, as capacity utilisation rates improved across the Group’s manufacturing facilities. Operating profit margins also improved, supported by greater optimisation of distribution and administration expenses. That said, elevated finance costs driven by the ongoing rise in global US Dollar interest rates were a significant drag on profitability. As a result, the Group recorded a post-tax loss of Rs. 257 Mn in the fourth quarter.
For the full year ended 31st March 2023, the Group’s revenue increased by 69.3% to Rs. 95.1 Bn. Nonetheless, the significant deterioration in market conditions during H2 eroded accumulated profits, and the Group closed the year with a post-tax loss of Rs. 1,038 Mn. Despite this, Hela’s balance sheet remained in a robust position with the Net-Debt-to-Equity ratio closing FY 2022/23 at 1.6, compared to 1.8 at the same point of the previous year, supported by improvements in the working capital cycle.
In a statement accompanying the financial results, the Company noted that it expects the challenging operating environment to continue into the first half of FY 2023/24 as consumers in its key export markets remain under pressure from high inflation. In this context, it will continue to focus on proactively strengthening its strategic customer partnerships based on its long-term value proposition as a leading global apparel supply chain solutions provider.
The organization also intends to remain agile in the evolving operating environment and consider additional proactive steps to manage costs and ensure a return to profitability. Several of the strategic initiatives taken during FY 2022/23, with a precise focus on process improvements, digital systems, and supply chain management are also expected to support the improvements in profit margins in the coming quarters.
Hela Apparel Holdings PLC is a social capital-focused company built on the principles of inclusivity, equity, and climate stability. With over three decades of industry experience, Hela focuses on building strategic partnerships with global brands to provide apparel supply chain solutions with distinctive advantages. The organisation has a global presence with 10 manufacturing facilities across Sri Lanka, Kenya, Ethiopia, and Egypt, as well as design centres in Sri Lanka, the US, the UK, and France, providing direct employment to over 20,000 people. Innovative, ethical, and sustainable apparel manufacturing is at the centre of Hela’s operations. With numerous accolades for sustainability, the organization was recently endorsed as a signatory to the UN Global Compact and was awarded the ISO 14064-1:2018 certification for quantification and reporting of greenhouse gas emissions across the Group for the second consecutive year.
Calais Dentelles announces the sale of ‘NOYON’ – Noyon Lanka acquires 100 years of lace heritage
In groundbreaking industry news, Noyon Lanka (Pvt) Ltd., a subsidiary of MAS Holdings, and DESSEILLES CALAIS, a subsidiary of the CALAIS DENTELLES holding company, announced the sale of NOYON CALAIS’ IP rights and other intangible assets to Noyon Lanka.
NOYON CALAIS is a French lace manufacturer known for a 100+ years of heritage in the industry. This Intellectual Property (IP) acquisition now positions Noyon Lanka as an industry leader in lace manufacturing, combining the legacy and heritage of NOYON CALAIS SAS and MAS Holdings’ technical competency and manufacturing excellence. This sale gives the opportunity for the French business DESSEILLES CALAIS to focus on their main luxury core market.
The IP and other assets acquired enable Noyon Lanka to draw inspiration, create and commercialize lace products and manufacture lace products under the trademark ‘Noyon’. Additionally, Noyon Lanka will now be the owner of all ‘Noyon’ trademarks belonging to Noyon Calais and will own all their archives of sketches, drafts, and samples of lace and embroidery fabrics from the 19th and 20th centuries.
With the acquisition, Noyon Lanka enhances its ability to provide high-quality lace products to customers worldwide, drawing upon and preserving the rich history and heritage of lace manufacturing in France.
Noyon Lanka’s CEO, Ashiq Lafir, commenting on the acquisition, said, “This acquisition will enable us to expand our product design offerings and strengthen our leadership position in lace manufacturing globally. We are humbled and proud to take ownership of NOYON CALAIS’ remarkable legacy and combine it with our technical expertise to create beautiful, innovative lace products for our customers”.
Sébastien Bento Soares, the Directeur Général – CEO of CALAIS DENTELLES, the parent company of NOYON CALAIS, added that “This asset sale enables DESSEILLES CALAIS to focus on our core luxury market and ensures that the rich history and legacy of Noyon’s lace continues to effectively serve its long-time customers, who have come to rely on Noyon’s heritage in lace to provide some of the world foremost brands with the finest lace designs that their customers have adorned over many generations”.
Noyon Lanka was established in 2004 when Noyon Calais France, an industry expert in knitted and leavers lace, partnered with MAS Holdings. Today, Noyon’s lace creators and designers launch over 450 designs each year, with collections ranging from multi-way stretch, high tenacity lace to engineered lace for fabric.
In addition to its production facilities in Sri Lanka, the company has a global footprint with a manufacturing presence in Indonesia and China.
In the image from left to right: Sébastien Bento Soares (Directeur Général – CEO of Calais Dentelles), Pascal Cochez (Chairman of Cochez group and Calais dentelles), Olivier Noyon (Shareholder – Noyon Lanka) and Ashiq Lafir (CEO – Noyon Lanka Pvt. Ltd.).
Nippon Paint Lanka sponsors painting of Sri Lanka’s tallest Buddha statue
Nippon Paint has donated the paint required to paint the tallest Buddha statue in Sri Lanka. Built by the Methsaviya Sansadaya, it is located at the Mahiyangana Purana Rajamaha Viharaya.
“History records Mahiyanganaya as the first place visited by the Lord Buddha nine months after receiving enlightenment,” said Vidyakeerthi Prof. Chandana Jayaratne, President of the Meth Saviya Sansadaya. “It is also recorded that the Lord Buddha donated a lock of hair to the leader of those who heard his preaching and embraced the noble path. This leader who was known as King Saman (Known today as Saman Deviyo), enshrined the relics and built the first Dagoba in Mahiyanganaya. This has been gradually increased in height during later years. On completion, this will be the tallest Buddha statue in Sri Lanka at 84-feet. The statue was unveiled on Sunday May, 28, 2023.”
Nemantha Abeysinghe, General Manager, Nippon Paint Lanka, said they were very happy to be associated in such a noble venture. “It is an honour for us to be able join the Meth Saviya Sansadaya to have the statue painted with high-quality, weather-resistant, and long-lasting Nippon Paint. Buddhism is the religion of the majority in Sri Lanka and we consider this as a contribution from Nippon Paint to the propagation of religion and culture in Sri Lanka.”
“We are deeply grateful to Nippon Paint Lanka for their noble gesture in donating not one but five coats of paint to withstand the heavy rains, winds and sunshine at this location,” Prof. Jayaratne said.
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