End Dec 2019 quarter earnings ease by 4.7% YoY for 266 listed companies

December quarter earnings dipped by 4.7%YoY to Rs. 66.6 billion primarily owing to sluggish performance in Food, Beverage and Tobacco (- 35% YoY), Insurance (- 41% YoY) and Capital Goods (-23%YoY) sectors, First Capital Research has said in a quarterly results review released on Monday.

However, earnings upside was witnessed in Banks (+ 17% YoY), Telecommunication (+ 259% YoY), Materials (+101%YoY) and Diversified Financials (+3%YoY) negating the negative performance in the above mentioned sectors, the report said.

The lackluster performance in Food, Beverage and Tobacco, Insurance and Capital Goods sectors was mainly owing to the lower consumer spending stemmed from subdued economic growth. Profit dip in CTC was due to successive tax hikes affecting volumes which resulted in the -24%YoY in earnings, while BIL ( Brown Investments) recorded a dip of -195%YoY mainly due to rise in cost of production and administration.

“MELS ( Melstacorp) earnings declined by -20%YoY in line with the dip in finance income and NEST (Nestle) dipped by -17%YoY along with the weakened consumer demand and rise in cost of sales. Accordingly, mainly led by the above counters, sector recorded a decline of 35%YoY. Dip of 41%YoY in Insurance sector earnings was primarily driven by CINS (Ceylinco Insurance) by -15%YoY and JINS ( Janashakthi Insurance) by -98%YoY (due to rise in benefits, claims and expenses), in addition, HASU (HNB Assurance) recorded a decline of 66% YoY ( due to the previous year recording a tax reversal). JKH recorded a downturn in earnings of -50%YoY primarily due to the leisure sector still harboring the impact of Easter Sunday attacks, exchange losses on its foreign currency denominated cash holdings compared to the previous year and lower finance income as a result of the deployment of cash in new investments leading to a -23%YoY decline in Capital Goods sector earnings,” the report said.

The Banking sector witnessed a profit growth of 17%YoY to record Rs. 23 billion primarily driven by HNB (+ 28% YoY) and SAMP ( Sampath) (+ 29% YoY). HNB and SAMP profits were boosted due to the fall in impairments by 48%YoY and 21%YoY, respectively. The Telecommunication sector recorded a growth of 259%YoY mainly due to DIAL ( Dialog) recording an earnings growth of 2538%YoY primarily driven by the foreign exchange gain compared to the heavy exchange loss incurred in the previous year. The Material sector presented a growth of 101% YoY in profits as a result of TKYO ( Tokyo Cement) which posted earnings of Rs.257 million relative to the Rs. 174.5 million loss posted in December 2018 and improved performance in LLUB (Chevron Lubricants) led by strong top line growth of 15%YoY. The diversified Financial sector posted a growth of 3% YoY with LOLC, LFIN ( LB Finance) and PLC ( People’s Leasing) posting earnings growth of 13% YoY, 27% YoY and 6% YoY, respectively, while earnings were supported by the strong net interest margin (NIMs).