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By Duruthu Edirimuni Chandrasekera - The Sunday Times
The aggregate earnings for the third quarter in Sri Lankan listed firms have increased 14.4% year on year, according to analysts backed by healthcare and consumer discretionary sectors’ showing the largest increase in earnings.
Healthcare leads
Radhika Ratnayaka, Research Analyst Lanka Securities (LS) noted that when considering 81% of the listed firms which released the quarterly financials as at November this year, the healthcare sector has seen a 99.6% year on year earnings growth while the consumer discretionary sector has witnessed a 83.4% year on year growth.
According to a LS research report, the earnings growth rate for the first nine months of 2011 in the said quoted companies was 36.7% year on year to Rs 137.6 billion. It said that the aggregate revenue for third quarter in 81% of the listed firms grew by 21.5% year on year.
“The profit leaders for the quarter were healthcare, consumer discretionary, consumer staples and financial services," Ms. Ratnayaka told the Business Times in comments outside the report, adding that investment companies and the plantations during this period recorded a drop in earnings.
Apart from financial services and utilities, the rest of the sectors posted double digit growth in their top line.
Industrials sector top dog
The report noted that the industrials sector was the top contributor to the earnings with 32% with its net earnings growing by 30.6% year on year supported by 20.3% year on year growth in revenue. Ms. Ratnayaka said that the financial services sector made the second largest contribution with 28.1% to the earnings on the back of banks reporting solid earnings growth at 26.4% year on year driven by volume growth, provision reversals, recoveries and tax reductions.
“As expected, the loans and advances accelerated at a remarkable pace of 18.9% while deposits grew at 13.0% during the first nine months of 2011. The non performing loans declined across the board. Almost all banks reported double digit growth in net profit,” she said.
The research report noted that the non bank financial institutions continued their earnings momentum and posted 100.5% year on year growth in their bottom line, but that the insurance sector witnessed a dry spell, with a dip of 31.2% year on year, as a result of the slowdown in their core business and fall in investment income.
FMCG shows robust growth
“The consumer staples or Fast Moving Consumer Goods (FMCG) reported robust net profit growth of 52% year on year. The top line saw a steady growth of 22.8% for this period, while the operating profit posted 50.6% year on year increase from the comparative quarter,” it said, highlighting that the largest growth came from the alcoholic beverage sub sector.
It also said that with demand kicking in from the growing per capita income levels, the consumer staples may continue to record strong profit growth in the coming quarters. Moreover, this will be further supported by the strong upswing in demand due to the festive season.
CSE downturn affects the investment holdings sector
According to the report, the investment holdings was negatively affected largely due to the downturn in the Colombo Stock Exchange with almost all firms reporting a drop in earnings, shedding their capital gains recorded in the comparative quarter. “But lower interest rate will contribute to this sector's recovery in the coming quarter," Ms Ratnayaka added.
The Healthcare sector posted sharp increase in its net profit after two successive negative growth. “The Asiri group led the pack supported by 58.6% year on year growth in profit from Lanka Hospitals," Ms. Ratnayaka noted, adding that the tax concessions to the industry, profits from the Asiri group’s newest addition – ‘The Central’ may lift the profit of the sector in the coming quarter.
During the September quarter, the leisure sector reported a squeeze in net earnings at a 14.4% year on year negative growth as some of the hotels were not operating at their full capacity during the period due to refurbishments. The sector revenue grew moderately at a rate of 11.2% year on year with its operating profit grew by 15.8% year on year.
But Ms. Ratnayaka noted that the industry started off peak season in a promising note with 32.8% year on year increase in arrivals in October suggesting another fruitful season for the sector.
The bottom line reported a solid growth of 55.6%YoY. With the financial year coming to an end, some of the companies may report fair value gains from property revaluations lifting the sector earnings in the next quarter.
The aggregate earnings for the third quarter in Sri Lankan listed firms have increased 14.4% year on year, according to analysts backed by healthcare and consumer discretionary sectors’ showing the largest increase in earnings.
Healthcare leads
Radhika Ratnayaka, Research Analyst Lanka Securities (LS) noted that when considering 81% of the listed firms which released the quarterly financials as at November this year, the healthcare sector has seen a 99.6% year on year earnings growth while the consumer discretionary sector has witnessed a 83.4% year on year growth.
According to a LS research report, the earnings growth rate for the first nine months of 2011 in the said quoted companies was 36.7% year on year to Rs 137.6 billion. It said that the aggregate revenue for third quarter in 81% of the listed firms grew by 21.5% year on year.
“The profit leaders for the quarter were healthcare, consumer discretionary, consumer staples and financial services," Ms. Ratnayaka told the Business Times in comments outside the report, adding that investment companies and the plantations during this period recorded a drop in earnings.
Apart from financial services and utilities, the rest of the sectors posted double digit growth in their top line.
Industrials sector top dog
The report noted that the industrials sector was the top contributor to the earnings with 32% with its net earnings growing by 30.6% year on year supported by 20.3% year on year growth in revenue. Ms. Ratnayaka said that the financial services sector made the second largest contribution with 28.1% to the earnings on the back of banks reporting solid earnings growth at 26.4% year on year driven by volume growth, provision reversals, recoveries and tax reductions.
“As expected, the loans and advances accelerated at a remarkable pace of 18.9% while deposits grew at 13.0% during the first nine months of 2011. The non performing loans declined across the board. Almost all banks reported double digit growth in net profit,” she said.
The research report noted that the non bank financial institutions continued their earnings momentum and posted 100.5% year on year growth in their bottom line, but that the insurance sector witnessed a dry spell, with a dip of 31.2% year on year, as a result of the slowdown in their core business and fall in investment income.
FMCG shows robust growth
“The consumer staples or Fast Moving Consumer Goods (FMCG) reported robust net profit growth of 52% year on year. The top line saw a steady growth of 22.8% for this period, while the operating profit posted 50.6% year on year increase from the comparative quarter,” it said, highlighting that the largest growth came from the alcoholic beverage sub sector.
It also said that with demand kicking in from the growing per capita income levels, the consumer staples may continue to record strong profit growth in the coming quarters. Moreover, this will be further supported by the strong upswing in demand due to the festive season.
CSE downturn affects the investment holdings sector
According to the report, the investment holdings was negatively affected largely due to the downturn in the Colombo Stock Exchange with almost all firms reporting a drop in earnings, shedding their capital gains recorded in the comparative quarter. “But lower interest rate will contribute to this sector's recovery in the coming quarter," Ms Ratnayaka added.
The Healthcare sector posted sharp increase in its net profit after two successive negative growth. “The Asiri group led the pack supported by 58.6% year on year growth in profit from Lanka Hospitals," Ms. Ratnayaka noted, adding that the tax concessions to the industry, profits from the Asiri group’s newest addition – ‘The Central’ may lift the profit of the sector in the coming quarter.
During the September quarter, the leisure sector reported a squeeze in net earnings at a 14.4% year on year negative growth as some of the hotels were not operating at their full capacity during the period due to refurbishments. The sector revenue grew moderately at a rate of 11.2% year on year with its operating profit grew by 15.8% year on year.
But Ms. Ratnayaka noted that the industry started off peak season in a promising note with 32.8% year on year increase in arrivals in October suggesting another fruitful season for the sector.
The bottom line reported a solid growth of 55.6%YoY. With the financial year coming to an end, some of the companies may report fair value gains from property revaluations lifting the sector earnings in the next quarter.
