March 2020 quarter earnings decline by 52.0% YoY for 266 companies: First Capital

The quarter ended in March 2020 reported a decline in earnings by 52.0% year -on-year for 266 companies, according to a report released by First Capital Research.

“March quarter earnings dipped by 51.9%YoY to LKR 33.6Bn primarily owing to sluggish performance in Diversified Financials (-87%YoY), Capital Goods (63%YoY), Food, Beverage & Tobacco (-72%YoY), Telecommunication (-52%YoY) and Consumer Services (-101%YoY)”, it said.

The report further said: “Upbeat quarterly performance was only witnessed in the following sectors; Banks (+32%YoY) followed by Food, Staples, and Retailing (+96%YoY) and Materials (+8%YoY)”.

“Lackluster performance in Diversified Financials, Capital Goods and Food, Beverage and Tobacco sectors was mainly owing to subdued economic growth which was heightened by the Covid-19 pandemic striking the island. PLC profit dipped by -90%YoY due to high impairments because of the slowdown in the economy caused a reduction in disposable income of customers and business volumes”.

“Consequently, there was a rise in non-performing loans in the sector which was the main factor for the decline in earnings of Commercial Credit and Finance Plc – (-56%YoY), LOLC Finance Plc (-29%YoY), LB Finance Plc (-19%YoY) as well. Therefore, primarily led by the above-mentioned counters, the Diversified Financial sector recorded a decline of 87%YoY”.

“Plunge in earnings by 63%YoY in Capital Goods was chiefly driven by SHL earnings reporting a loss of LKR 3.3Bn (-11033%YoY) followed by the decline in earnings in BRWN (-53%YoY) and SPEN (-45%YoY)”.

“Notably, JKH recorded a growth of 18%YoY primarily due to the growth in profits in Consumer Foods, Retail and Property segments, overall, the Capital Goods sector recorded a decline in earnings”.

|Banking sector witnessed a profit growth of 32%YoY to record LKR 14.6Bn primarily driven by COMB (+20%YoY), HNB (+57%YoY) and SAMP (+27%YoY). COMB, HNB and SAMP profits were boosted due to financial investment gains (forex and mark to market gains) coupled with the removal of NBT and Debt Repayment Levy which improved the bottom line”.

“Cargills Ceylon Plc recorded an impressive growth of 134%YoY driven by the growth in FMCG and retail space, benefiting the Food, Staples and Retailing sector to record a growth of 96%YoY”, First Capital report said.