Quarterly earnings skid but transportation & materials sectors outperformed: FCR

Nov 14, 2020 (LBO) – June 2020 quarter recurring earnings follow suit of previous quarters by declining 58.0%YoY for 267 companies, First Capital Research said in its quarterly results review.

On a recurring basis, June 2020 quarter earnings dipped by 58.0%YoY to LKR 17.7Bn primarily owing to sluggish performance in Diversified Financials (-97%YoY), Capital goods (-471%YoY), Consumer Services (-108%YoY) and Real Estate (-84%YoY) sector earnings.

However, negative performance of above-mentioned sectors was negated by the earnings growth in Transportation (+1043%YoY) and Materials (+60%YoY) sectors.

Total earnings for the quarter, without adjustments registered a decline of 36.5%YoY as it included a one-off gain pertaining to LOLC. LOLC’s profitability spiked by 137%YoY as it included a one-off gain recognised from the sale of 70% of its stake in PRASAC.

This transaction also resulted in Diversified Financials sector earnings boosting by 55%, although on a recurring basis sector recorded a profit decline of 97%YoY.

Moreover, BIL’s previous year, corresponding quarter augmented a one-off gain which included a gain on bargain purchase of 67% stake in a company which holds sugar cane plantation and a factory in Sierra Leone.

Diversified Financials, Capital Goods and Consumer Service sector counters shattered the quarterly earnings

On a recurring basis, Diversified Financials sector earnings dipped by 97%YoY largely led by CFIN (-79%YoY) and LOFC (-91%YoY). CFIN’s profits declined as a result of drop in NII and rise in impairments. LOFC’s bottom line fell as a result of the spike in impairment to LKR 5.7Bn.

In the Capital Goods sector, JKH became the negative contributor incurring a loss of LKR 1.6Bn (-267%YoY) compared to LKR 994.0Mn profits in 1QFY20 mainly due to the significant loss in the leisure sector of LKR 2.5Bn resulting from the hotel closure due to COVID-19.

Moreover, SHL made a loss of LKR 2.4Bn (-230%YoY) compared to a loss of LKR 753.0Mn in 1QFY20 led by losses made in its Retail & Telecommunication, Financial Services and Leisure & Property sectors. Consumer Services sector earnings dipped primarily led by significant losses in two key players, KHL amounting to LKR -1.7Bn (-297%YoY) and AHUN amounting to a similar loss of LKR -1.7Bn (-292%YoY).

Real Estate sector earnings plunged owing to the profit dip in EAST to LKR 135.5Mn (-95%YoY) amidst the significant reduction in finance income.

Transportation and Materials sectors outperform

Transportation sector witnessed a profit surge of 1043%YoY to record LKR 1.7Bn with EXPO thriving in its freight forwarding business with logistics solution for PPE skyrocketing in demand amidst the COVID-19 pandemic.

Materials sector earnings were supported by improved performance in DIPD (+501%YoY), HAYC (+156%YoY), CIC (+262%YoY) and TKYO (+26%YoY).

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