Sri Lanka company earnings growth picks up in June quarter

ECONOMYNEXT – Sri Lanka’s company earnings growth picked up in the June 2015 quarter as consumption increased, driven by low borrowing costs and higher disposable incomes, a research report said.

Overall market earnings growth in the June 2015 quarter picked up 10.7 percent year-on-year to 46.7 billion rupees after a slowdown to 2.2 percent year-on-year during the March 2015 quarter, CAL Research said.

Trailing 12 month market earnings grew 16.5 percent from a year ago to 207 billion rupees due to low interest rates and improving disposable incomes driving up consumption, compared with a contraction of 8.4 percent during the same period last year, they said.

CAL Research, the research unit of Capital Alliance Ltd., said the Banks, Finance & Insurance sector of firms listed on the Colombo bourse contributed 40 percent to earnings growth, the largest sector-wise contributors to market earnings in the June 2015 quarter.

They were followed by the Beverage, Food and Tobacco sector with a contribution of 18 percent and Diversified Holdings with 13 percent.

Earnings from firms in the Chemicals and Pharmaceuticals sector grew the fastest, up 180 percent from a year ago, followed by those in the Stores and Supplies sector, up 137 percent, and Motor Sector firms, up 78 percent.

But plantations sector firms suffered the most in the June 2015, with earnings falling by 138 percent from the previous year, followed by  those in the Hotels & Travels sector, whose earnings slumped 95 percent, and Investment Trusts whose earnings fell 66 percent. 

CAL Research said the Colombo Stock Exchange currently trades on a Trailing Twelve Month Price-to-Earnings Ratio of 14.4x and a Price-to-Book Value of 1.6x.

The largest individual contributors to June 2015 quarter earnings on the CSE came from Ceylon Tobacco Company (6.5 percent), Commercial Bank (5.7 percent), Hatton National Bank (5.1 percent) and John Keells Holdings (4.7 percent).

Lanka India Oil Corp. (LIOC) reported a net profit of 171 million rupees in the June 2015 quarter against 1.2 billion rupees in the same 2014 period.

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Carson Cumberbatch and Bukit Darah, whose earnings are influenced by palm oil prices, saw net profit declines of 58 percent and 67 percent from the previous year.

The combined earnings of these three firms accounted for 2 percent of market earnings in the June 2015 compared with  9 percent of market earnings the year before.

Excluding LIOC, Carson and Bukit Darah, overall market earnings grew 18 percent in the June 2015 quarter from the year before, CAL Research said. (Colombo/August 24 2015)
 

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