Listed companies earnings soar

• 2Q21 performance gains by 117% Y-o-Y to Rs. 76 b and 12 months trailing market earnings up 93% Y-o-Y to Rs. 349 b 

Listed companies 2Q2021 earnings have expanded by 117% to Rs. 75.6 billion primarily driven by the lower base effect as the corresponding quarter of the previous year was impacted by the initial COVID-19 induced lockdowns.  Capital Alliance said listed entities benefitted from multiple factors to enjoy such high growth.

They included: 1) the boost in Y-o-Y consumption 2) import restrictions favouring local manufacturers 3) pandemic-driven demand and prices for certain export-related goods and 4) the strong performance by the Banking sector. 

The quarter also registered a 33% increase in earnings in comparison to 2Q20219. Consumer Durables and Apparel (+1467% Y-o-Y), Transportation (+259% Y-o-Y), Banks (Rs. 31.8 b) and Telecommunication Services (+68% Y-o-Y) were the largest contributors towards the quarter’s performance. 

The Consumer Durables and Apparel was supported by the performance of Ambeon Holdings PLC, which benefited from the capital gain from the sale of South Asia Textiles and Ambeon Capital which contributed 86% of the sector’s earnings for the quarter. 

The Food, Beverage and Tobacco industry grew 92% Y-o-Y due to its inelastic nature despite the pressure on consumer spending. The Telecommunication sector earnings grew 68% Y-o-Y with Dialog Axiata recording a 100% Y-o-Y gain, owing to the escalation in data consumption coupled with the low base effect as concessionary packages were provided to consumers during the height of lockdown during 2Q2020. 

The Banking sector (25% of total earnings) earnings grew 70% Y-o-Y supported by the expansion in margins coupled with the non-occurrence of the “day one loss” on the debt moratorium experienced in 2Q2020. 

Capital Alliance said market earnings were dragged down by the performance in the Consumer Services segment (hotels), which recorded a loss of Rs. 5.5 billion due to travel restrictions resulting in lower hotel occupancies. 

The Y-o-Y gain in the Transportation industry was on the back of the exceptional performance of Expolanka Holdings PLC, which gained from the surge in freight yields and volumes from charter flights. 

The 25% Y-o-Y gain in the Materials segment was owing to the strong performance at 1) Dipped Products (+104% Y-o-Y) which saw higher selling prices and pent-up demand for gloves as a result of the pandemic, 2) CIC, which grew 119% Y-o-Y following the turnaround in its livestock business. 

Market earnings were further boosted by the finance cost savings materialising from the lower interest rate environment. 

The largest individual contributors to the quarter earnings were, 1) Expolanka Holdings PLC, which recorded earnings amounting to Rs. 6.3 b (+260% Y-o-Y), 2) Commercial Bank of Ceylon PLC (Rs. 5.5 b; +53% Y-o-Y), and 3) Hatton National Bank PLC (Rs. 4.7 b; +124% Y-o-Y). 

John Keells Hotels PLC recorded the highest loss for the quarter amounting to Rs. 1.2 billion. 

TTM earnings continued its upward trajectory expanding 13% Q-o-Q and 93% Y-o-Y to Rs. 349 billion. Capital Alliance said the CSE currently trades on a PER of 10.4x and a PBV of 1.1x.