Corporate earnings jump 57.4% in March quarter

• Banks, FMCG drive recovery
• Banking sector recorded 43.5 percent year-on-year increase in earnings
• Food, Beverage, and Tobacco sector saw profits climb 174.8 percent from a year earlier
• Earnings from the Consumer Durables and Apparel sector fell sharply by 206.6 percent year-on-year, reversing previous gains

Listed companies posted 57.4 percent year-on-year increase in earnings for the March 2025 quarter, marking the sixth consecutive quarter of growth. This is as banking and consumer-led sectors outperformed on the back of lower finance costs and improved operating conditions, according to an analysis by First Capital Research.

The sharp recovery in corporate profitability was driven by a boost in net interest income within the banking sector, alongside reduced impairment charges and higher fee-based revenue, analysis showed. Lower interest rates also helped compress finance costs across many sectors, lifting overall bottom lines.

The banking sector recorded a 43.5 percent year-on-year increase in earnings. Major players including Commercial Bank (COMB), Hatton National Bank (HNB), Sampath Bank (SAMP), Nations Trust Bank (NTB), National Development Bank (NDB), Seylan Bank (SEYB), and Pan Asia Banking Corporation (PABC) collectively recorded a 52.9 percent surge in profits for the quarter.

The earnings boost was supported by an expansion in net interest income, as lower interest rates reduced funding costs faster than income yields declined. Fee and commission income also grew, aided by increased card transactions and digital banking services. A decline in loan impairment charges, reflecting improved credit quality, further strengthened the sector’s profitability.

However, the sector faced pressure from elevated operating expenses, and a few lenders including DFCC Bank, Sanasa Development Bank (SDB), and Housing Development Finance Corporation (HDFC) reported earnings contractions.

The Food, Beverage, and Tobacco sector reported the strongest earnings growth across all segments, with profits climbing 174.8 percent from a year earlier. The increase was driven by strong topline growth, margin expansions, and reduced finance costs.

Key contributors to the sector’s performance included Ceylon Tobacco Company (CTC), Melstacorp (MELS), Cargills (CARS), Distilleries Company of Sri Lanka (DIST), Bukit Darah (BUKI), Cold Storage (CCS), and Lion Brewery (LION), which together accounted for 63.4 percent of sector earnings. 

Improved macroeconomic stability helped support demand recovery, while lower input costs and a strengthening rupee improved margins. The low-interest rate environment further reduced borrowing costs, adding to bottom-line gains.

Meanwhile, earnings from the Consumer Durables and Apparel sector fell sharply by 206.6 percent year-on-year, reversing previous gains. The sector’s downturn was primarily driven by HELA and Dipped Products (DPL), which together saw a 251.5 percent earnings contraction. HELA reported a loss of Rs. 8.8 billion during the quarter, compared to a profit of Rs. 6.0 billion in the same period last year. The reversal was attributed to reduced gross margins, higher operational expenses, and impairment charges on financial assets and goodwill. DPL’s results were impacted by a 31.0 percent decline in revenue and a 113.0 percent increase in selling and distribution expenses as it attempted to retain market share in a price-sensitive environment.

The Real Estate sector posted a 26.0 percent year-on-year drop in earnings, dragged down by steep declines at sector heavyweights Overseas Realty (OSEA) and CT Land Development (CTLD). 

OSEA reported a 44.7 percent drop in quarterly earnings, hit by foreign exchange losses during the period, reversing gains made in the prior year. CTLD saw its earnings fall 73.3 percent, due to a lower revaluation gain on investment properties compared to the March 2024 quarter.