Strong 4Q for Sri Lanka’s listed companies as profits climb 19%

Sri Lanka’s listed corporates wrapped up another quarter of blowout profits in the forgoing December quarter last year with the earnings rising by 19 percent from the same period in 2023, led by a jump in earnings from the banking sector.

According to a brief report on how the corporate earnings fared in the foregoing quarter by CAL Research, Sri Lanka’s listed companies which reported their interim performance for the October – December quarter last year had reported a cumulative Rs.218.0 billion. Despite its outsize nature, the December quarter earnings came in slightly down or 7 percent off from the quarter before in September which came in at Rs.236.0 billion, the research unit reported.

CAL Research attributed the year-onyear (YoY) jump in earnings to a slew of factors from eased net finance cost, higher economic activities and most significantly the outsize performance in the banking sector, post the external debt restructure and the acceleration in loan growth. “The banking sector posted the highest earnings with a 160 percent YoY increase in profitability, primarily due to impairment reversals taking place after the finalisation of the External Debt Restructure (EDR)”, the research house added. Banking sector earnings which effectively brought the December quarter earnings to a close last Friday, saw a massive lift from the reversals of impairment provisions that they had made for possible losses from the haircuts, as EDR resulted in much more favourable terms for the banks which effectively helped them to bring back almost entirely the provisions they made on them.

However, this was despite the massive day-1 losses on the existing bonds which were exchanged for new bonds. The banking sector added a massive Rs.61.9 billion in earnings, followed by the food and beverage sector with Rs.50.7 billion in earnings.

Financial services sector followed third adding in Rs.40.0 billion in earnings for the quarter, making up for the three largest sectors contributing to total December quarter earnings. This followed the capital goods sector with Rs.21.3 billion and materials and telecommunications with Rs.9.45 billion and Rs.9.12 billion among the main sectoral candidates to contribute to the earnings.

Among the individual companies which saw the most jumps in earnings in the December quarter according to Capital Alliance Research were Commercial Bank of Ceylon PLC, Hatton National Bank PLC and LOLC Holdings PLC. Meanwhile, revenue, despite could differ based on what constitute the top-line in different companies, has increased by 35 percent in the quarter to Rs.2,089 billion.