Listed companies’ earnings up 3%

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By 2017-08-24

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By Nishel Fernando

Earnings of public quoted companies grew by 3 per cent YoY to Rs 53 billion in the second quarter, however, the second quarter earnings declined by 9 per cent compared to the first quarter of this year according to a report released by Capital Trust Securities (Pvt) Ltd.

Contributing to 53 per cent of overall earnings, the financial sector posted 13 per cent YoY growth in earnings in the second quarter, despite high interest rates and increased regulations on the financial industry by the Central Bank of Sri Lanka. The banking sub-sector led the financial sector posting 23 per cent growth in earnings and contributed to 29 per cent YoY of earnings among all public quoted companies in the second quarter. Insurance sub-sector experienced a growth in earnings of 45 per cent YoY while real-estate related financial sub-sector experienced a sharp decline in earnings of 20 per cent YoY.

The Commercial Bank and Sampath Bank emerged as the top earning companies among public quoted companies, each contributing to 7 per cent of overall earnings replacing John Keels Holdings.

The energy sector earnings declined by 129 per cent YoY to a loss of Rs 591 million due to rising......energy prices in the global market and the government's price controls on energy prices. Earnings in the consumer discretionary sector declined by 88 per cent YoY as consumer purchasing power was affected by currency devaluation, increased value added tax (VAT) and higher interest rates
Utilities sector earnings were the most improved, as the earnings in the sector improved by 48 per cent YoY, helping the sector to recover from a loss of Rs 77 million recorded in the first-quarter of 2016 to Rs 222 million in earnings in the second-quarter. The improvement is mainly caused by higher margins and the government initiative to open up investment in renewable energies such as wind power and solar parks in partnership with the private sector.

In addition, the Telecommunication Services sector also showed an increase in earrings, posting 13 per cent growth in the second-quarter compared to the first quarter of this year, as Telecommunication companies are transforming their business models moving from traditional revenue streams to modern communication services. The industry is expected to benefit from the government's decision to abolish the telecommunication levy on internet data.

Consumer staples and healthcare sectors both posted healthy growth in earnings of 41 per cent and 21 per cent YoY in the second-quarter while industrial and material sectors experienced a decline in earnings of 6 per cent and 29 per cent YoY in the second-quarter.

The Colombo Stock Exchange (CSE) had 295 companies representing 20 business sectors as at 14th July 2017, with a market capitalization of Rs 3,068.3 billion. Sri Lanka had a ratio of stock market capitalisation to Gross Domestic Product (GDP) of about 23 per cent in 2016.

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