Listed company earnings contract for third straight quarter as aggregate profits of Sri Lanka’s listed companies declined during the March 2026 quarter, although underlying business performance remained significantly stronger after adjusting for major one-off gains and losses.
Listed company earnings contract for third straight quarter despite strong core growth
According to a report released by First Capital Research, the combined earnings of 271 listed companies fell 11.4% year-on-year (YoY) during the March 2026 quarter, extending the trend of earnings contraction to a third consecutive quarter. However, analysts noted that headline earnings figures were heavily distorted by exceptional items recorded by several large listed companies.
After excluding significant one-off gains and losses reported by Bukit Darah PLC, Carson Cumberbatch PLC, Browns Investments PLC, and Brown and Company PLC in both the March 2025 and March 2026 quarters, First Capital Research estimated underlying corporate earnings growth at a robust 30.1% YoY.
The research firm said the adjusted figures provide a more accurate picture of business performance and profitability trends across Sri Lanka’s corporate sector.
The Food, Beverage and Tobacco sector emerged as the largest drag on overall earnings during the quarter. Sector profits declined 73.8% YoY and 55.0% quarter-on-quarter (QoQ), largely due to the impact of large exceptional items and base effects.
A key factor behind the decline was the high comparison base created by a Rs.35 billion one-off gain recorded by Browns Investments PLC during the March 2025 quarter. Additionally, Carson Cumberbatch PLC and Bukit Darah PLC faced significant pressure after their Indonesian subsidiary, Goodhope Asia Holdings Ltd., was subjected to an administrative fine estimated between Rs.24 billion and Rs.25 billion.
Browns Investments also reported weaker performance as higher operating costs weighed on profitability. Despite the sharp decline at sector level, First Capital noted that 31 out of 45 companies within the Food, Beverage and Tobacco sector remained profitable, with many reporting year-on-year earnings improvements supported by stronger sales volumes and improving economic activity.
The Diversified Financials sector also reported weaker results, with earnings declining 5.0% YoY despite recording a 12.8% increase compared to the previous quarter.
The sector’s performance was significantly affected by First Capital Holdings PLC, which recorded mark-to-market losses on financial assets amid rising market yields and heightened geopolitical tensions following the onset of the US-Iran conflict. The company reported a loss of Rs.1.2 billion during the quarter, while other firms including GUAR and CINV also weighed on overall sector profitability.
However, several financial institutions reported stronger earnings supported by expanding net interest income and growing loan portfolios. Analysts attributed part of this growth to increased vehicle imports and registrations, which boosted financing activity across the sector.
The Retailing sector emerged as the standout performer during the March quarter, delivering earnings growth of 404.6% YoY and 62.5% QoQ. The strong performance was largely driven by the resumption of vehicle imports and stronger consumer demand.
United Motors Lanka PLC recorded earnings growth of 750.4% YoY, with profits rising to Rs.2.1 billion from Rs.248.8 million a year earlier. The company benefited from significantly higher vehicle sales as import restrictions eased and consumer demand improved.
Richard Pieris and Company PLC also delivered strong results, reporting earnings growth of 246.8% YoY to Rs.2.6 billion. Growth was supported by contributions from subsidiaries including United Motors Lanka and Plantation and Petroleum Resources Development Ltd., alongside revenue growth exceeding 300% YoY.
Singer Sri Lanka PLC further strengthened the sector’s performance, reporting earnings growth of 77.5% YoY and revenue growth of 47.4% YoY, driven by higher demand for electronic appliances and consumer goods.
The Telecommunications sector also recorded impressive growth, with earnings increasing 99.8% YoY and 26.9% QoQ.
Dialog Axiata PLC was the largest contributor to sector growth. The company reported earnings growth of 122.4% YoY and 50.5% QoQ, supported by subscriber expansion, higher average revenue per user (ARPU), and cost efficiencies resulting from the scaling down of its lower-margin international wholesale operations.
Sri Lanka Telecom PLC also delivered a strong performance, with revenue increasing 10.6% YoY and earnings rising 53.3% YoY due to improved operating margins and stronger profitability.
First Capital Research highlighted that the Retailing, Telecommunications, and Real Estate sectors each recorded underlying earnings growth exceeding 100% YoY. The firm said the contrast between reported profits and adjusted results demonstrates how one-off gains and losses significantly influenced headline earnings figures.
While listed company earnings contract for third straight quarter on a reported basis, the stronger underlying corporate earnings growth suggests that many businesses continue to benefit from improving economic conditions, stronger consumer demand, and sector-specific recovery trends across the Sri Lankan economy.