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September quarter earnings declined by 9.6 per cent – FC research

The earnings of Sri Lanka’s listed companies (264 listed companies) for the September quarter dipped by 9.6 per cent year-on-year (YoY) to Rs 45.8 billion, primarily due to sluggish performance in Insurance (-48 per cent YoY), Consumer Services (-495 per cent YoY), Capital Goods (-39 per cent YoY) and Food, Beverage and Tobacco (-12 per cent YoY) sectors, an equity research firm stated.

However, equity research firm First Capital Research stated that increases in earnings were witnessed in Material (108 per cent YoY), Consumer Durable & Apparel (13,600 per cent YoY) and Energy (646 per cent YoY) sectors, negating the negative performance in the above-mentioned sectors.

Lackluster performance was seen in the Insurance, Consumer Services and Food, Beverage and Tobacco sectors, mainly due to lower consumer spending stemming from subdued economic activities.

Insurance sector earnings recorded a substantial drop, mainly due to earnings declines in Softlogic Life Insurance PLC (AAIC) (-85 per cent YoY) from a deferred tax adjustment and Union Assurance PLC (UAL) (-91 per cent YoY) due to the increased transfer of insurance contract liabilities to the life fund.

Consumer Services sector earnings declined and posted a loss of Rs 1.67 billion relatively to a profit of Rs 0.4 billion in September 2018, as a result of the drop in tourist arrivals subsequent to the Easter Sunday attacks.
Food, Beverage and Tobacco sector earnings dipped by 12 per cent YoY to Rs 7.8 billion, led by BIL, MELS and tea plantation companies. BIL posted a loss of Rs 1.19 billion, compared to a loss of Rs 0.6 billion a year ago, due to higher finance and admin cost.

MELS earnings dropped by 58 per cent due to hefty taxes, while the cost of sales also surged against the last year same period. A profit dip witnessed across the tea plantation counters due to weaker tea prices further dragged down the Food, Beverage and Tobacco sector earnings.

The Material sector saw a profit growth of 108 per cent YoY to Rs 1.8 billion, driven by TKYO (573 per cent YoY). TKYO profits were boosted due to operational efficiencies and increase in maximum retail price. Consumer, Durable & Apparel sector saw impressive earnings growth of 13,600 per cent YoY with TJL, MGT and GREG posting earnings growth of 84 per cent, 83 per cent and 184 per cent, respectively.

TJL and MGT earnings growth was supported by efficiency improvements, strong order book and stable cotton prices. Energy sector posted a strong earnings growth of 646 per cent YoY in profits as a result of turnaround in LGL, which posted earnings of Rs 17.0 million relative to a Rs 305.0 million loss posted in September 2018 and improved performance in LIOC due to higher focus on bunkering, lubricant operations and export market.