Listed company earnings contract for third straight quarter

• First Capital Research says earnings of 271 listed companies fell 11.4% YoY in March 2026 quarter
• Food, Beverage and Tobacco sector dragged down by one-off losses and high base effects
• Underlying earnings growth stood at 30.1% YoY after adjusting for major exceptional items
• Retailing and telecommunications emerge as top performers amid higher vehicle imports and subscriber growth

Aggregate earnings of 271 listed companies declined 11.4% year-on-year (YoY) in the March 2026 quarter, marking a third consecutive quarter of earnings contraction, according to First Capital Research.

The investment research firm said reported earnings were heavily influenced by large one-off gains and losses, particularly within the Food, Beverage and Tobacco sector, masking stronger underlying profitability trends across several sectors.

After adjusting for major exceptional items recorded by Bukit Darah PLC, Carson Cumberbatch PLC, Browns Investments PLC and Brown and Company PLC in both the March 2026 and March 2025 quarters, First Capital estimated underlying earnings growth at 30.1% YoY.

“The aggregate corporate earnings delivered underlying earnings growth of 30.1%YoY, a more representative reflection of core profitability trends,” the report said.

The Food, Beverage and Tobacco sector was the largest contributor to the decline in aggregate earnings, with profits falling 73.8% YoY and 55.0% quarter-on-quarter (QoQ).

According to First Capital, the decline largely reflected a high base effect stemming from a Rs. 35 billion one-off gain recognised by Browns Investments in the March 2025 quarter. Additional pressure came from Carson Cumberbatch and Bukit Darah, whose Indonesian subsidiary, Goodhope Asia Holdings Ltd., was subjected to a one-off administrative fine estimated at approximately Rs. 24 billion to Rs. 25 billion, equivalent to around $ 108.4 million.

Browns Investments also swung to a loss as a higher cost base weighed on profitability.

Despite the sector’s earnings decline, First Capital noted that 31 of the 45 companies within the Food, Beverage and Tobacco sector remained profitable, with the majority recording year-on-year earnings improvements supported by volume-driven revenue growth amid improving economic conditions during the first quarter.

The Diversified Financials sector reported a 5.0% YoY decline in earnings despite a 12.8% QoQ increase.

The decline was largely driven by First Capital Holdings (CFVF), which recorded mark-to-market losses on its financial assets as market yields moved higher amid heightened geopolitical tensions following the onset of the US-Iran conflict. CFVF reported a loss of Rs. 1.2 billion during the quarter, while GUAR and CINV also weighed on overall sector profitability.

In contrast, First Capital said several major financial companies recorded stronger earnings supported by net interest income expansion and loan book growth underpinned by higher vehicle imports and registrations.

The Retailing sector emerged as the strongest performer during the quarter, posting earnings growth of 404.6% YoY and 62.5% QoQ.

According to the report, a significant rise in vehicle imports during January-March 2026 supported higher vehicle sales, helping United Motors Lanka PLC increase earnings by 750.4% YoY to Rs. 2.1 billion from Rs. 248.8 million a year earlier.

Richard Pieris and Company PLC recorded earnings growth of 246.8% YoY to Rs. 2.6 billion, supported by the performance of its subsidiaries United Motors Lanka PLC and Plantation and Petroleum Resources Development Ltd., (PAP), alongside revenue growth exceeding 300% YoY.

Singer Sri Lanka PLC also contributed positively, recording earnings growth of 77.5% YoY alongside revenue growth of 47.4% YoY, driven by stronger demand for electronic appliances.

The Telecommunications sector also delivered a strong performance, with earnings rising 99.8% YoY and 26.9% QoQ.

Dialog Axiata PLC was the largest contributor, with earnings increasing 122.4% YoY and 50.5% QoQ alongside revenue growth of 9.0% YoY. First Capital attributed the improvement to subscriber growth, higher average revenue per user (ARPU) and cost efficiencies following the scaling down of its low-margin international wholesale business.

Sri Lanka Telecom PLC also recorded a strong quarter, with revenue increasing 10.6% YoY and earnings rising 53.3% YoY, supported by EBIT margin expansion.

First Capital noted that the Retailing, Telecommunications and Real Estate sectors each recorded underlying earnings growth exceeding 100% YoY.

The research firm said the divergence between reported and underlying earnings reflected the impact of several large one-off gains and losses recorded during the quarter. After adjusting for these items, corporate earnings growth remained positive across several sectors, particularly retailing, telecommunications and real estate.