Cumulative listed company earnings end seven-quarter growth run

• Earnings fall 12% YoY to Rs. 176 b in Sep. 2025, first decline in two years

Corporate earnings declined year-on-year (YoY) in the September 2025 quarter, ending a seven-quarter growth streak, as sharp contractions in food, beverage and tobacco and capital goods outweighed continued strength in banks and diversified financials.

According to earnings compiled by First Capital Research, aggregate profits of 273 listed companies fell 12% YoY to Rs. 176.5 billion in the Sep-25 quarter from Rs. 200.2 billion a year earlier. On a sequential basis, however, earnings rose 14% quarter-on-quarter, indicating that underlying momentum remained intact despite near-term sectoral pressures.

First Capital said banking (Rs. 52 billion, up 39% YoY) and diversified financials (Rs. 39 billion, up 112% YoY) continued to underpin overall earnings resilience, while weakness in food, beverage and tobacco (Rs. 32 billion, down 60% YoY) and capital goods (Rs. 11 billion, down 72% YoY) weighed heavily on aggregate performance.

Three sectors reported losses: Consumer services (Rs. 1.3 billion, down 43% YoY), commercial and professional services (Rs. 97 million, down 56% YoY) and software and services (Rs. 26 million, down 80% YoY).

The food, beverage and tobacco sector recorded a steep 60% year-on-year decline in earnings, alongside an 8.7% quarter-on-quarter contraction. First Capital attributed the downturn to disruptive weather conditions and rising costs, particularly labour. 

Within the sector, BIL posted the sharpest decline, with earnings falling 117.1% year-on-year due to an adverse base effect. In the September 2024 quarter, BIL had recorded Rs. 50.8 billion in gains from investment acquisitions, compared to Rs. 47.2 million in the current quarter. 

Despite the earnings slump, BIL’s revenue rose nearly 90% year-on-year, while gross profit increased by around 17%, partly offset by a more than doubling of cost of sales. CTC was hit by volume declines linked to weather disruptions, while SUN’s bottom line was mainly affected by a 75.1% year-on-year increase in income tax expenses.

Earnings in the capital goods sector fell 71.8% year-on-year, largely reflecting a high base from one-off gains recorded in the September 2024 quarter. 

BRWN alone accounted for much of the drag, after reporting Rs. 32.8 billion in gains on bargain purchases a year earlier, compared to Rs. 30.5 million in Sep-25, resulting in a 118.3% year-on-year drop in earnings. 

Excluding this impact, First Capital noted that underlying sector performance remained broadly resilient, with most companies posting earnings growth and the sector recording a sharp 234.4% quarter-on-quarter rebound. 

BRWN still delivered a 73.1% year-on-year increase in revenue, though an 85.9% rise in cost of sales limited gross profit growth to 40%. MEL, RICH and LWL also saw earnings declines, driven by weaker other income, higher income tax charges and rising administrative and finance expenses.

In contrast, diversified financials emerged as the strongest performing sector in the Sep-25 quarter, with earnings surging 112.6% year-on-year and rising 18.2% quarter-on-quarter. 

First Capital said the performance was supported by a softer interest rate environment, improving macroeconomic conditions and sustained demand for imported vehicles. LOLC and LOFC led sectoral growth, posting year-on-year earnings increases of 166.9% and 106.1% respectively. 

LOLC recorded a 17.2% year-on-year rise in net interest income and a 32.0% expansion in gross profit, driven mainly by its manufacturing and trading segment. LOFC benefited from loan book expansion, margin improvement and an impairment reversal of Rs. 176.9 million. 

GUAR reported an exceptional 2,764.5% year-on-year increase in earnings, driven primarily by a Rs. 1.1 billion fair value gain on financial assets amid rising equity markets.

The banking sector also maintained a solid growth trajectory, with earnings up 38.9% year-on-year and 6.8% quarter-on-quarter. 

First Capital said lower interest rates supported loan growth, while improved net fee and commission income, aided by higher remittances and trade flows, contributed positively. The recovery in capital-intensive sectors such as construction also improved asset quality and lending appetite. 

COMB, HNB and NDB emerged as the top performers, with HNB’s results further boosted by a Rs. 2.1 billion impairment reversal during the quarter.

Despite the year-on-year decline, First Capital said the quarter-on-quarter rebound in earnings highlights that the broader earnings recovery remains in place, even as sector-specific headwinds continue to shape near-term performance.