By: Staff Writer
Colombo (LNW): Sri Lanka’s key corporates continue to suffer following the Covid -19 outbreak and man made economic crisis.
Listed Sri Lankan corporates in consumer-goods retail, power generation and homebuilding will be among the most affected if the economic crisis deepens or is sustained for a prolonged period, market analysts said.
Significant cost inflation affecting demand and profitability, import restrictions disrupting operations, and high interest rates are key risks faced by domestic corporates in the next 18 months, they pointed out.
According to analytical reports, several analysts project that most other corporates will be able to weather the current economic downturn, supported by their presence in defensive industries, weakened competition, strong balance sheets, and adequate liquidity.
The December 2022 quarter earnings of listed companies suffered their first decline since 2020 by 44% to Rs. 96.4 billion, according to First Capital Research.
The results were for 281 listed companies and First Capital said the dip was owing to sluggish performance primarily in the Capital Goods (-82.6%YoY to Rs. 5 billion), Transportation (-87%YoY to Rs. 3 billion), Telecommunications (-226.8%YoY to a loss of Rs. 9.6 billion) and Diversified Financials (-38.9%YoY to Rs. 20.3 billion) segments.
The December 2022 quarter also puts an end to seven consecutive quarters of earnings growth enjoyed by the companies.
However upbeat quarterly performance was only witnessed in the Energy (14,183.9%YoY to Rs. 12.8 billion), Banking (38.9%YoY to Rs. 30 billion), Food, Beverage and Tobacco (12.3%YoY to Rs. 26.6 billion) and Utilities (28.1%YoY to Rs. 2.1 billion) sectors.
First Capital said Capital Goods saw an 82.6%YoY decline to Rs. 5 billion largely driven by the poor performance of Browns (-3430.4%YoY) and HAYL (-99.6%YoY) due to the significant rupee depreciation which caused a significant increase in the cost of materials
The Transportation sector recorded an 87%YoY decline to Rs. 3 billion primarily led by Expolanka Holdings (-87%YoY) due to the reduction in operating volumes across both air freight and ocean freight products,
Telecommunications sector also witnessed a downfall in net income by 226.8%YoY to a loss of Rs. 9.68 billion largely led by Dialog (-280.8%YoY) .
On the other hand, Diversified Financials sector earnings dipped by 38.9%YoY to Rs. 20.3 billion mainly due to the losses made in LOLC (-41.8%YoY).
This was a result of a significant impairment adjustment for its fair value measurement of financial assets primarily in the financial services and manufacturing and trading segments.
The lacklustre performance in this sector during the quarter was also driven by an increase in corporate tax rates to 30% from 24% w.e.f. effective from October 2022.
The Energy sector recorded a growth of 14,183.9% YoY to Rs. 12.8 billion largely driven by excellent performance of Lanka IOC which recorded an increase in earnings of 825.4% YoY to Rs. 8.2 billion.
The Banking sector witnessed a profit surge of 38.9%YoY to record Rs. 29.9 billion led by Commercial Bank of Ceylon which saw a significant increase in net income by 68.2% YoY to Rs. 8.8 billion.
The Food, Beverage and Tobacco sector earnings gained by 12% to Rs. 26.5 billion due to improved performance in DIST (193.3%YoY) and MELS (125.3%YoY) which were aided by high food inflation.
