Dec. quarter corporate earnings surge 91% despite macroeconomic challenges

• Pent-up demand and festive demand after lifting of virus related restrictions helped propel earnings 

Sri Lanka’s listed corporate sector delivered yet another breakout quarter in the three months ended December 2021recording stellar growth, indicating that they had largely defied the macro-economic challenges, which came from the dollar and supply chain crunches, rising rates and prices across the economy. 

According to First Capital Research, 284 of Sri Lanka’s listed companies reported cumulative earnings of Rs.174.8 billion recording massive 91.3 percent growth over the same period a year ago.  This also translated into a huge 57 percent increase on a quarter-on-quarter basis from the September quarter’s Rs.111.4 billion cumulative earnings. 

The December quarter cumulative earnings of listed entities marked the second highest increase in earnings after 202 percent increase recorded in the January-March quarter in 2021 when the Sri Lankan economy was off to a burst after the gradual ending of virus related restrictions which plunged the economy into a recession in 2020.  

However, the re-emergence of the virus in new form from April forced the country to enter into prolonged lockdowns and restrictions, which persisted through October 1, 2021.

December earnings were however supported by the pent up demand triggered after the end of the virus related restrictions on October 1, 2021 and the festive year-end demand. 

But, the earnings reports were characterised by margin compression, supply chain constraints and challenges confronted when sourcing imported goods. “Resumption in economic activities in 4Q2021 and increased pent-up demand following the travel restrictions in 3Q2021 resulted in a surge in earnings during the quarter,” First Capital Research said. 

The December quarter earnings were supported mainly by the sectors such as diversified financials, transportation, capital goods, 

food, beverage tobacco, and consumer services.  “Except for Energy (-110.9 percent YoY), Automobiles & Components (-23.2 percent YoY) and Household & Personal Products (-27.8 percent YoY), all other sectors also contributed to the upsurge in profitability,” First Capital Research noted.