Corporate earnings soar to best quarter in two years in September

• Cumulative earnings up 61% YoY to Rs.73.9bn
• Key sectors that propelled growth were: food, beverage and tobacco; transportation; capital goods and materials

Sri Lanka’s listed company earnings surged to its best in two years during the July-September quarter, as lifting of virus related lockdowns, fiscal and monetary stimulus, rebound in exports and pent up demand, boosted their top lines, while they themselves made their operations leaner to post record profits. 

According to the First Capital Research (FCR), which keeps a track on quarterly earnings, Sri Lanka’s 268 listed entities out of 285, reported cumulative earnings of Rs.73.9 billion logging a 61.1 percent jump from the same quarter in 2019. 

The last time these companies delivered a similar performance was in the October-December quarter in 2018 but the heavy taxes, higher interest rates, political and policy uncertainty and Easter Sunday deadly attacks blunted the momentum until the November elections in 2019.

According to FCR, the biggest catalysts behind the stellar performance were food, beverage and tobacco sector, which had its earnings surging by 96 percent from a year ago, transportation by 578 percent, capital goods by 112 percent and materials by 154 percent. 

The individual companies which underscored this strong performance were Ceylon Tobacco, Melstacorp via its Distilleries Company and Lion Brewery, which makes one to ask if the tobacco and spirits were the driving forces behind the earnings under food, beverage and tobacco sector, as the pandemic has given these companies an unusual flywheel in sales if otherwise would not have occurred in usual times. 

Meanwhile, under transportation segment, Expolanka led the charge, “where there was a surge in demand for emergency supplies via air freight into North American markets,” FCR said. 

Performance at Hayleys group, which is captured under capital goods sector, got a boost from its hand protection, purification, agriculture and plantation segments. 

Tokyo Cement led the material sector due to, “increased demand for cement, mainly arising from the residential sector,” FCR said. 

Meanwhile, consumer services, banks and real estate delivered lacklustre performance due to muted performance in the travel, tourism and hospitality sector, higher impairments and narrowing margins in banks and decrease in apartment sale and decline in rental incomes.