EconomyNext – Profit growth of Sri Lankan listed companies slowed in the fourth quarter of 2014 with banks accounting for the largest chunk helped by bond market gains, a research report said.
Total market earnings on the Colombo bourse went up 9.3 percent to 55.8 billion rupees in the quarter from a year ago, the report by Capital Alliance Securities (Private) Ltd. said.
This was much slower than the sharp 52.8 percent rise in the third quarter of the financial year year-on-year.
Trailing 12-month market earnings in 2014 grew 16.7 percent to 203 billion rupees from the year before "due to improved economic conditions during the latter part of the year," the brokerage said.
Corporate earnings had fallen 13 percent in the 2013 calendar year from the year before.
In the fourth quarter of 2014, the biggest sector-wise contributors to market earnings were the banks, finance and insurance sector (42 percent) followed by the diversified holdings sector (16 percent) and beverage, food and tobacco sector (12 percent).
The largest growth in the quarter came from the footwear and textiles sector (89 percent growth year-on-year) followed by trading firms whose earnings grew 155 percent.
Plantations firms suffered the most with earnings down 85 percent from the year before owing to lower prices for tea and rubber, followed by investment trusts and oil palm firms.
Capital Alliance Securities said John Keells Holdings made the largest individual contributor to earnings (7.8 percent) in the fourth quarter followed by Commercial Bank (6.1 percent), Ceylinco Insurance (3.6 percent) and Ceylon Tobacco Company (3.6 percent).
Financial sector earnings grew 35 percent in the fourth quarter from a year ago led by private commercial banks, mainly stemming from gains made from their bond portfolios, the report said.
This was despite net interest margins (NIMs) of banks remaining flat at around five percent.
Finance and other non-bank financial firms NIMs grew to 10.6 percent while insurance company profits fell 10 percent although revenues (Gross Written Premiums) rose 11 percent.
Higher costs saw hotels and travel sector profits falling 23 percent to two billion rupees.
"Cost increases during the quarter saw the sector’s earnings before interest and tax margins contracting 170 basis points as most hotels were unable to pass on the increasing costs to their customers," Capital Alliance Securities said, noting that sales went up only 2.3 percent during the quarter.