One-off losses drag corporate earnings down for third straight quarter

•  Aggregate earnings of 271 listed companies fell 11.4% year-on-year to Rs. 186.3 billion in the March 2026 quarter
•  A sharp 73.8% drop in earnings from the food, beverage and tobacco sector accounted for much of the decline

Listed companies reported a third consecutive quarter of declining earnings in the three months ended March, as losses in the food, beverage and tobacco sector dragged down overall profitability despite signs of strengthening activity across large parts of the economy.

Aggregate earnings of 271 listed companies fell 11.4 percent year-on-year to Rs. 186.3 billion in the March 2026 quarter, improving from contractions of 20.5 percent and 21.2 percent recorded in the preceding two quarters, according to a review by First Capital Research.

A sharp 73.8 percent drop in earnings from the food, beverage and tobacco sector accounted for much of the decline. The sector was hit by the absence of a Rs. 35 billion one-off gain booked by Browns Investments in the corresponding quarter a year earlier, while Bukit Darah and Carsons Cumberbatch were affected by an administrative fine imposed on their Indonesian palm oil subsidiary, Goodhope Asia Holdings.

Diversified financials, the market’s second-largest earnings contributor, also reported a 5.0 percent decline, largely due to mark-to-market losses at Capital Alliance Finance as bond yields moved higher amid heightened geopolitical tensions.

However, First Capital said the headline contraction overstated the weakness in corporate performance.

After adjusting for large one-off gains and losses recorded by Browns Investments, Bukit Darah, Carsons Cumberbatch and Browns Beach Hotels, underlying corporate earnings rose 30.1 percent from a year earlier, reflecting stronger operating performance across most sectors.

The recovery was particularly evident in sectors benefiting from rising consumer demand and the reopening of imports.

Retailing sector earnings jumped 404.6 percent year-on-year, driven by increased vehicle imports and stronger sales volumes. Telecommunications earnings climbed 99.8 percent as subscriber growth, higher average revenue per user and cost efficiencies boosted profitability at Dialog Axiata and Sri Lanka Telecom. Real estate sector earnings also rose 133 percent during the quarter.

Banks remained the largest contributor to market earnings, generating Rs. 47.3 billion in profits during the quarter, followed by diversified financials at Rs. 34.9 billion and capital goods companies at Rs. 32.1 billion.

Commercial Bank reported the highest quarterly profit among listed companies at Rs. 17.7 billion, while Hatton National Bank, LOLC Holdings and Dialog Axiata were among the top earnings contributors. Bukit Darah, Carsons Cumberbatch and Browns Investments posted the largest losses.