Listed firms’ December earnings grow 5.3% amid higher consumption

Sri Lanka’s listed companies’ overall earnings during the December quarter of 2015 grew a moderate 5.3 percent year-on-year (YoY) to Rs.59.2 billion, improving from the 6.2 percent YoY contraction seen in the September quarter, a regular earnings update released by a Colombobased research house noted. As usual, the December quarter earnings have been led by the bank, finance and insurance (BFI) sector earnings as the sector contributed to as much as 45 percent or Rs.26.7 billion to the total earnings.

The sector earnings grew 13 percent YoY, an earnings update by Capital Alliance Research (CAL Research) said. This is followed by the sectors, diversified holdings and beverage, food and tobacco with contributions of 16 percent and 13 percent, respectively.

“The largest individual contributors to 4Q15 earnings were John Keells Holdings (6.6 percent), Hatton National Bank (6.0 percent), Commercial Bank (5.8 percent), Lanka Orix Leasing Company (3.7 percent) and Ceylon Tobacco (3.1 percent),” CAL Research said. Investment and trust (-276 percent YoY), plantations (-111 percent YoY) and services (-101 percent YoY) suffered the most. Under the BFI sector, private sector commercial banks made a total earning of Rs.12.7 billion, up 0.2 percent YoY, led by Commercial Bank PLC’s Rs.3.4 billion earnings.

The finance and leasing sector had a total earning of Rs.Rs.9.2 billion, up 33 percent YoY, while the insurance sector total earnings grew 20 percent YoY to Rs.4.9 billion, led by Ceylinco Insurance PLC (Rs.1.8 billion). The BFI sector total earning for 2015 was Rs.84.4 billion, up 19 percent, driven primarily by Lanka Orix Leasing Company PLC profit growth of 92 percent YoY to Rs.7.9 billion. “The finance and leasing sector average net interest margin fell 58 basis points to 9.5 percent whilst the banking sector net interest margin was down 24 basis points

The beverage, food and tobacco sector earnings grew 14 percent YoY to Rs.7.4 billion with Ceylon Tobacco Company PLC and Distilleries Company of Sri Lanka PLC accounting for 49 percent of sector earnings. The construction and engineering sector earnings declined 32 percent YoY to Rs.464 million.

The chemical and pharmaceutical sector earnings grew 59 percent YoY to Rs.948 million, led by CIC Holdings, which accounted for 59 percent of sector earnings. The diversified sector bottom line narrowed one percent YoY to Rs.9.3 billion. The sector earnings were led by John Keells Holdings PLC and Carson Cumberbatch PLC. Hotels and travels sector followed suit as its earnings fell 13 percent YoY to Rs.1.8 billion due to a decline in earnings witnessed in most companies in the sector. The healthcare sector earnings grew 66 percent YoY to Rs.1.2 billion while the manufacturing sector earnings grew 53 percent YoY to Rs.6.1 billion.

The motor sector earnings grew 18 percent YoY to Rs.1.2 billion due to higher contribution from United Motors Lanka PLC. The higher sector earnings were due to increase in new vehicle registrations amid lower vehicle taxes. The power and energy sector earnings grew 30 percent YoY to Rs.1.9 billion with the main contribution coming in from Lanka IOC PLC Laugfs Gas PLC. The plantation sector bottom line fell 111 percent YoY to a net loss of Rs.46 million with decline in earnings in most companies in the sector.

The full-year net loss was Rs.1 billion (- 153 percent YoY). “The decline in earnings was primarily driven by lower global prices for rubber and tea as well as a decline in demand from Russia and the Middle East due to slowing economic conditions,” CAL Research said. Meanwhile, the telecommunication sector comprising of Sri Lanka Telecom PLC and Dialog Axiata PLC saw net profit falling by as much as 90 percent YoY to Rs.238 billion.

For the 12 months ended in December 31, 2015 the Colombo Stock Exchange listed companies grew their total earnings 1.6 percent to Rs.207.1 billion supported by low interest rates and improving disposable incomes driving consumption.