Sri Lanka firms tracked by Fitch to lose Rs30bn in revenues to Coronavirus

ECONOMYNEXT – Companies in Sri Lanka tracked by Fitch Ratings are expected to lose 30 billion rupees in revenues in the year to March 2021, or 40 billion if two telcos are excluded, with hotels being the hardest hit, the rating agency said.

Fitch has downgraded the rating or outlooks of 30 percent of rated firm in Sri Lanka.

“This suggests the possibility of further downgrades should recovery prospects be delayed, although a faster recovery than we expect could lead Fitch to revise the Outlooks to Stable,” Fitch said.

Sri Lanka has re-opened the economy after containing Coronavirus through, early, aggressive tracing and quarantine, though a reluctance to test by authorities has led to spikes in clusters.

Fitch said risks to projections would include a ‘second wave’ that would lead to new lockdowns or a prolonged weak global economic and travel environment, which could depress Sri Lanka’s economy for longer than expected.

About 35 percent of the revenue fall would come from hotels, which are expected to lose 75 percent of their revenues in 2021.

“We expect consumer durables retailers to account for the second-highest revenue drop; the sector represents 30 percent of the aggregate revenue loss,” Fitch said.

“Demand for consumer durables has improved since the lockdown was lifted, primarily due to pent-up demand.

“However, demand may again weaken on falling disposable incomes after the initial post-lockdown enthusiasm dissipates.”

Telecoms and pharmaceutical distribution and manufacturing, fast-moving consumer goods and food and beverage sectors should record a fast recovery owing to their essential nature and defensive demand characteristics, Fitch said. (Colombo/July21/2020)