Listed corporates post best earnings ever in Dec. quarter

• Combined value of Rs. 85 billion is highest quarterly earnings in the history of CSE
• Growth continued beyond pent-up demand in 3Q of 2020 up 15.6% QoQ
• Multiple based valuations down as earnings soared 33% YoY

Listed corporates combined have posted their best earnings ever of Rs. 85 billion in the quarter ended on 31 December 2020, setting a new record despite COVID-19 linked challenges.

Softlogic Stockbrokers, which analysed the earnings, said yesterday that the combined figure reflected a 33.3% increase year-on-year (YoY) and it was the best ever in the Colombo Stock Exchange. 

“The 33.3% YoY growth was a strong sign of the earnings momentum continuing beyond the pent-up demand cycle expected in 3Q 2020, as the QoQ earnings grew 16% for Q4 2020,” Softlogic Stockbrokers said. “The growth is in testament to the favourable climate for local companies during the post-lockdown period backed by import protectionism, economic stimulus and USD depreciation, which proved to benefit of local industries and export segments,” it added.

Softlogic said that the exceptional performance was achieved despite the continuation of localised lockdowns during the period from October to December and lower levels of mobility as the country faced the second wave of COVID-19.

It also said that the 33% earnings spike was despite a Rs. 6 billion loss from companies listed under Consumer Services.

Earnings spanning four quarters amounted to Rs. 212.4 billion marginally up by 0.5% from a year earlier. 

The banking sector earnings grew 42% QoQ in 4Q’20 amidst higher impairment provisioning and margin contraction, cumulative trailing 12-months (TTM) earnings marginally down at -6% YoY. 

Capital Goods sector earnings were up 66% YoY in 4Q’20 and up by 62% QoQ basis, on the back of import protectionism, USD depreciation and revival in activity levels, despite the dip of JKH.

Food Beverage and Tobacco saw earnings marginally decline by 3% QoQ basis, holding due to inelastic nature of products despite lower consumer spending, whilst the palm oil price-spike drove earnings up by 75% YoY in 4Q’20.

Health Care Equipment & Services sector earnings improved significantly by 105% YoY and 68% QoQ due to the surge in demand in the healthcare sector.

The materials sector earnings improved significantly (147% YoY) remaining broadly around the 3Q earnings mark (-7% QoQ) to record a growth of over 100% on a TTM Basis.

The retailing sector witnessed a phenomenal growth in earnings by 401% YoY (-42% QoQ) driven by the strong pent-up demand which continued to be seen in 4Q despite reaching its peak in 3Q 2020.

Telecommunication sector earnings surged 21% YoY in 4Q’20 on the back of improved data consumption, cost savings initiatives and reduced operational expenses.

Transportation sector earnings spiked 1,930% YoY to Rs. 4.6 billion on the back of the extraordinary earnings boost witnessed by EXPO during the prolonged travel restrictions, and the resulting spike in air freight rates.

The Utilities Sector earnings grew 19% QoQ in 4Q’20 as favourable weather conditions resulted in a strong growth of power generation, leading to a marginal growth of 1% YoY in line with its seasonality.

The Power Sector earnings grew 1,018% YoY and 103% QoQ in 4Q’20 due to a strong turnaround by Laugfs Gas compounded by the improved profitability of LIOC.