Earnings Surge by 207%YoY for 253 Companies – First Capital Research
March quarter earnings surged by 207%YoY to LKR 110.8Bn led by Diversified Financials (988%YoY), Capital Goods (214%YoY), Food, Beverage & Tobacco (669%YoY), Banks (70%YoY) and Materials (267%YoY). However, a sluggish quarterly performance was witnessed in Consumer Services (-643%YoY), Real Estate (-19%YoY) Consumer Durable & Apparel (-170%YoY) and Insurance (-4%YoY).
Multiple sectors performed energetically: Exceptional results were witnessed inDiversified Financials, Food, Beverage & Tobacco, Capital Goods, Banks and Materials sectors. Diversified Financials recorded a growth of 988%YoY primarily driven by the growth in LOLC Holdings PLC (LOLC) (7,781%YoY) boosted by net other income, and People Leasing & Finance PLC (2,936%YoY) owing to the reduction in impairment.
LOLC HOLDINGS (LOLC) recorded a profit of LKR 7.3Bn for 4QFY21, up by 7,781%YoY compared to the loss of LKR 94.5Mn in 4QFY20. Total operating profit increased by 781%YoY to LKR 7.4Bn as a result of decrease in interest expense by 18%YoY, increase in income and other income by 117%YoY and 34%YoY, respectively.
Financial services segment the main contributor to increase in EBIT recorded a growth of 479.7%YoY to reach LKR 4.8Bn due to increase Net interest income by 60%YoY. Lower income tax rate, relative to the last year comparative quarter also favourably impacted the bottomline.PEOPLE LEASING & FINANCE (PLC) 4QFY21 earnings were recorded at LKR 3.2Bn (+2,935.6%) compared to LKR 0.1Bn in 4QFY20. Profit growth was mainly derived from an impairment reversal of LKR 1.9Bn in 4QFY21 as against an impairment charge of LKR 2.6Bn in 4QFY20.Net Interest Income slightly declined by 0.3%YoY to LKR 4.1Bn amidst decline in Loans and receivables by 3.1%YoY to LKR 149.3Bn.CENTRAL FINANCE (CFIN) recorded a profit of LKR 2.5Bn for 4QFY21, up by 165.6%YoY compared to the profit of LKR 0.93Bn in 4QFY20. Profitability growth was mainly supported by growth in other revenue and reversal in impairment provisioning. Net interest income decreased by 32.6%YoY to LKR 2.4Bn as a result of the decrease in interest income by 28.6%YoY to LKR 3.7Bn. CFIN’s impairment witnessed a notable decline in 4QFY21 recording a reversal of LKR 455.4Mn (down by 128.9%YoY) compared to the surge witnessed inprevious quarters.L B FINANCE (LFIN) 4QFY21 earnings were recorded at LKR 2.8Bn (+120.6%YoY) compared to LKR 1.3Bn in 1Q2020. Profit surge was due to the significant reduction in impairment by 87.1%YoY to LKR 151.9Mn amidst increase in NII by 43.0%YoY to LKR 5.0Bn. Lending which comprised of Loans & Leases declined by 3.8%YoY to LKR 114.8Bn.
Lower income tax favourably impacts bottom line
Food, Beverage and Tobacco sector earnings grew by 669%YoY to LKR 16.7Bn led by MELS, NEST BUKI and CARS. MELS earnings spiked by 255%YoY due to increase in other income and lower taxation rate. MELSTACORP (MELS)recorded a profit of LKR 2.4Bn up by 254.9%YoYfor 4QFY21 compared to LKR 678.2Mn recorded in 4QFY20. Revenue for the period under review increased by 8.9%YoY to LKR 43.5Bn, while GP margin dropped by 515bps to 18.3% in 4QFY21 relative to the comparative quarter due to increase of excise duty. Beverage segment was the main positive contributor to the increase in EBIT recording a growth of 14.9%YoY to 2.5Bn, while financial services segment also witnessed a growth in EBIT by 494.7%YoY to LKR 646.8Mn due to lower taxation during the quarter.NESTLE LANKA (NEST) 1Q2021 earnings recorded at LKR 1.74Bn (+170% YoY) compared to LKR 0.64Bn in 1Q2020.
Profit growth was mainly driven by the increase in revenue to LKR 11.4Bn (+25%YoY) and increase in GP margin to 36%. Part of the GP was offset by Marketing, Selling & Dist., expenses which jumped by 19% to LKR 1.6bn.LION BREWERY CEYLON (LION)4QFY21 earnings were LKR 528.0Mn (-4%YoY) compared to LKR 547.0Mn in 4QFY21.Profit Before Tax growth was mainly driven by the increase in revenue by 21.9%YoY to LKR 14.8Bn amidst the improvement in GP margins by 327bps to 21.6%. However, Profit after Tax was significantly eroded by the increase in Income Tax Expense by 788.5%YoY to LKR 644.7Mn. CEYLON COLD STORES (CCS) recorded a profit of LKR 1.4Bn up by 55%YoY for 4QFY21 compared to LKR 0.9Bn in 4QFY20. Growth in bottom line was mainly driven by the improvement in revenue by 11%YoY to LKR 19.0Bn with the increase in sales in the retail sector which contributed to an increase in segmental revenueby 9.2%YoY. GP margin for 4QFY21 improved marginally to 13.9% compared to 13.2% in 4QFY20 aiding the growth in the bottom line.
Lower income tax, relative to the last year comparative quarter also favourably impacted the bottom line. Capital Goods sector witnessed a growth of 214%YoY benefited from remarkable performance in HAYLEYS (HAYL) (1,417%YoY) due to the strong performance in Hand Protection and Consumer & Retail segments while also benefiting from currency depreciation. Further the sector was benefited by TILE (962%YoY), LWL (1,753%YoY) and RCL (330%YoY) supported by the import restrictions. HAYL4QFY21 earnings LKR 3.5Bn (+1,416.7%YoY) compared to LKR 234.0Mn in 4QFY20. Profit growth was mainly driven by Hand Protection and Consumer & Retail segments which recorded Operating Profits of LKR 1.4Bn (641%YoY) and LKR 1.9Bn (87%YoY) respectively.
Net Finance cost decreased by 60.8%YoY to LKR 1.0Bn as a result of repayment of borrowings by 6.6%YoY and the low interest environment.ROYAL CERAMICS LANKA (RCL) recorded a profit of LKR 2.8Bn up by 330%YoY for 4QFY21 compared to LKR 656.6Mn in 4QFY20. Profit growth was mainly driven by the increase in revenue to LKR 14.2Bn (90%YoY) and spike in GP margin by 793bps to 41.1% due to the price increase in tiles and increase in share of associate profit (Profit from LB Finance) by 122%YoY to LKR 744.7Mn.Finance cost has reduced by 63%YoY due to the low interest rate environment.LANKA WALLTILES PLC (LWL) recorded a profit of LKR 1.5Bn up by 1,753.4%YoY for 4QFY21 compared to LKR 83.2Mn in 4QFY20. Profit growth was mainly driven by the increase in revenue to LKR 9.2Bn (99.5%YoY) and spike in GP margin by 1,133bps to 35.5% due to the price increase in tiles amidst import restriction. Finance cost has reduced by 55.0%YoY due to the low interest rate environment.
JOHN KEELLS HOLDINGS (JKH) record a profit of LKR 4.8Bn up by 27%YoY for 4QFY21 compared to LKR 3.7Bn in 4QFY20. Revenue for the period under review up by 4%YoY to LKR 35.6Bn, indicating that JKH witnessed a faster than anticipated recovery in most of its business segments excluding leisure. Consumer segment earnings improved by 95%YoY to LKR1.14Bn due to strong basket value while Retail segment profit improved by 67%YoY to LKR 0.6Bn driven by margin improvement in both beverage and frozen confectionary. Due to low interest rate environment, insurance contract liabilities to the Life Fund increased by 114%YoY to LKR 2.0Bn.HEMAS HOLDINGS (HHL)4QFY21 earnings were LKR 859.4Mn (+79.2%YoY) compared to LKR 479.8Mn in 4QFY21. Profit growth was mainly driven by Consumer Brands segment which recorded a profitability growth of 192.3%YoY to LKR 620.1Mn.
Finance cost decreased by 44.2%YoY to LKR 125.1Mn with repayment of borrowings by 20.3%YoY amidst the low interest environment.RICHARD PIERIS AND COMPANY (RICH) 4QFY21 earnings were recorded at LKR 1.3Bn (+371.1%) compared to a loss of LKR 468.6Mn in 4QFY20. Profit growth was mainly driven by the increase in total revenue by 28.2%YoY to LKR 16.0Bn while GP margin increased by 178bps to 24.4%. Plastic, Furniture and Electronics segment was the main contributor for the growth in EBIT recording an increase of 260.6%YoY to LKR 463.5Mn, followed by Tyre and Rubber segments contributing LKR 270.7Mn (47.9%YoY) and LKR 376.1Mn (33.5%YoY) respectively. VALLIBEL ONE (VONE) 4QFY21 earnings LKR 3.6Bn (+299.7%) compared to LKR 910.8Mn in 4QFY20.Profit growth was mainly driven by Lifestyle and Finance segments which recorded Profit Before Tax of LKR 3.3Bn (+352.9%YoY) and LKR 3.5Bn (+174%YoY) respectively. Net Finance cost decreased by 70.7%YoY to LKR 205.3Mn as a result of decline in borrowings by 26%YoY and the low interest environment.
Banks too did well
Banks witnessed a 70%YoY growth in earnings to record at LKR 24.8Bn primarily driven by COMB (79%YoY), SAMP (91%) and HNB (55%). Profits were boosted due to financial investment gains (forex and market to market gains) coupled with reduction in impairment provisioning. COMMERCIAL BANK OF CEYLON PLC (COMB) 1Q2021 earnings were LKR 6.8Bn (+79.3%YoY) compared to LKR 3.8Bn in 1Q2020. Profit growth was mainly driven by the increase in NII by 21.8% to LKR 15.5Bn in 1Q2021 despite increase in impairment by 7.6% to LKR 7.2Bn. Loans & advances grew by 2.2% in 1Q2021 to LKR 929.6Bn.SAMPATH BANK (SAMP) 1Q2021 earnings were recorded at LKR 5.1Bn (+90.7%YoY) compared to LKR 2.7Bn in 1Q2020. Profit growth was mainly driven by the decline in impairment by 69.6%YoYto LKR 1.6Bn in 1Q2021 despite the decline in NII by 5.5% to LKR 10.2Bn Loans & advances grew by 2.7% in 1Q2021 to LKR 772.7Bn. HATTON NATIONAL BANK (HNB) 1Q2021 earnings were LKR 4.7Bn (+55%YoY) compared to LKR 3.0Bn in 1Q2020. Profit growth was mainly attributable to the increase in trading gains by 288%YoY and increase in contribution via Net Insurance Premium by 27%YoY to LKR 2.5Bn, while reduction in impairment was at 37%YoY to LKR 2.9Bn. Loans & advances marginally declined by 1% in 1Q2021 to LKR 792Bn.
Material sector has reason to smile
Material sector witnessed a growth of 267%YoY largely benefited by DIPPED PRODUCTS (DIPD) (1,448%YoY), LLUB (198%YoY) and TKYO (92%YoY).DIPD 4QFY21 earnings were LKR 1.7Bn (+1,448%) compared to LKR 0.1Bn in 4QFY20. Profit growth was mainly driven by the surge in revenue by 88.1%YoY to LKR 13.8Bn amidst the increase in GP margins by 1,100bps to 26.7%. However, distribution cost and administrative expenses for 4QFY21 also increased significantly by 65%YoY and 75%YoY respectively. CHEVRON LUBRICANTS LANKA (LLUB)1Q2021 earnings were recorded at LKR 1.53Bn (+198% YoY) compared to LKR 0.52Bn in 1Q2020 Profit growth was mainly driven by the increase in revenue to LKR 4.4Bn (+53%YoY) while GP margin increased by 190bps to 42%. COS was up by 48%YoY to LKR 2.5Bn mainly resulted by the rise in Base Oil prices as well as the significant rupee depreciation. TOKYO CEMENT COMPANY (TKYO) 4QFY21 earnings were LKR 1.3Bn (+92.2%YoY) compared to LKR 0.7Bn in 4QFY20. Profit growth was mainly driven by the Income Tax reversal of LKR 572.0Mn recorded for 4QFY21 relative to Income Tax expense of LKR 22.4Mn in 4QFY20. Revenue growth of 47.4%YoY to LKR 12.4Bn was offset by the dip in GP margins by 629bps to 24.4% and unprecedented surge in distribution expenses by 95%YoY to LKR 1. 9Bn. Finance Cost reduced by -65.7%YoY to LKR 170.6Mn with settlement of borrowings by 42.0%YoY.ALUMEX (ALUM) 4QFY21 earnings were LKR 489.7Mn (+27,725%YoY) compared to LKR 1.8Mn in 4QFY20. Profit growth was mainly driven by the increase in revenue to LKR 2.1Bn (+88%YoY) and spike in GP margin by 1,661bps to 32.89%. Finance cost has reduced by 37%YoY due to the low interest rate environment. HAYCARB (HAYC)4QFY21 earnings LKR 639.5Mn (+38.2%YoY) compared to LKR 462.8Mn in 4QFY20.Profit growth was mainly driven by the surge in revenue by 27.0%YoY to LKR 6.7Bn despite the slight decrease in GP margins by 73bps to 26.6%.Net Finance Income of LKR 158.4Mn was recorded compared to LKR 61.6Mn Net Finance Cost in 1QFY20. DIALOG AXIATA (DIAL)1Q2021 earnings were recorded at LKR 2.4Bn (+64%YoY) compared to LKR 1.5Bn in 1Q2020. Profit growth was mainly driven by the increase in revenue to LKR 32.9Bn (+12%YoY) and reduction in impairment losses on financial assets. Finance cost has reduced by 33%YoY amidst repayment of borrowings while net foreign exchange losses increased by 31%YoY amidst depreciation of LKR.
Consumer Services, Real Estate & Hospitality Trade record dull period
Consumer Services and Real Estate illustrated a dull performance: The Tourism industry continued to be adversely influenced, hence, Consumer Services sector earnings recorded a dip of 643%YoY. Real Estate sector earnings (-19%YoY) have slowed down due to the ongoing pandemic, out of which RIL and SHAW witnessed a decline in earnings by 65%YoY and 89%YoY, respectively. JOHN KEELLS HOTELS (KHL) continued to be in losses for the 4th consecutive quarter, recording a net loss of LKR 776.4Mn down by -953%YoY for 4QFY21, against a profit of LKR 91.0Mn a year ago. KHL’s top line fell 45%YoY to LKR 2.0Bn, due to lower occupancy in both Sri Lanka and the Maldives resorts amidst coronavirus. Net finance expenses rose by 8%YoY to LKR 295.2Mn. ASIAN HOTELS & PROPERTIES (AHPL) 4QFY21 earnings were LKR -543.3Mn (-341.4%YoY) compared to LKR 225.0Mn in 4QFY20. Profit fall off was mainly driven by the decrease in revenue by 57.9%YoY to LKR 0.62Bn with revenue from ‘Leisure’ segment declining by 57.1%YoY to LKR 0.60Bn. OP margin declined to -11.4% in 4QFY21 compared to 10.5% in 4QFY20. Fair value loss of the Investment Property was recorded at LKR 458.8Mn in 4QFY21 against a gain of LKR 153Mn recorded in 4QFY20. AITKEN SPENCE HOTEL HOLDINGS (AHUN)4QFY21 earnings were LKR -372.1Mn (-346.2%) compared to LKR 151.1Mn in 4QFY20.Profit drop was mainly driven by the decline in revenue by 34.2%YoY to LKR 3.7Bn with OP margins dipping to -6.0% in 4QFY21 compared to 15.5% in 4QFY20.Finance cost reduced by 14.3%YoY to LKR 508.3Mn despite increase in borrowings by 11%YoY