Sri Lankan corporate results released so far have far exceeded market expectations, analysts said.
“The market was expecting better profits to come through this year, but the firms have managed to post better results already,” analysts said.
The recently listed Ceylon Tea Brokers’ (CTBL) profits have improved significantly on attractive tea prices and growth in market share (mostly top line growth), Deshan Pushparajah, Assistant Manager Capital Alliance said. CTBL recorded Rs 25.2 million for the year ended 31st March 2010 against the Rs 10.3 million during the same period a year earlier.
Another analyst, commenting on the same company, said that reduction in Finance Costs has resulted in better margins on CTBL’s tea advances. Tokyo Cement saw an increase in profits main due to the fall in cost of sales/ production and the significant reduction in taxes, he said.
“The drop in cost of sales can be because of lower energy costs,” he said, adding that the revenue has not gone up yet for Tokyo because the construction boom has not occurred as yet.
The company posted Rs 1.3 billion in profit for the year ended 31st March 2010 against the Rs 142.8 million during the same period a year earlier. Meanwhile the company established a new wholly owned subsidiary, Tokyo Cement Power (Pvt) Ltd last week.
“Power generation in general is a very good business because it’s a cash-cow with very little risk (firm buyer and agreed prices through the Power Purchase Agreement). It’s used by businesses that operate in high risk industries to diversify their risk. It’s also very profitable,” Mr. Pushparajah noted.
There were also some firms such as Nestles, whose performance was hit by the global recession.
“Nestle has not improved during the last three months which has been the case for other fast moving consumer goods firms as well.
The lack of performance comes from the topline, presumably the reason for this is a drop in volumes over the last year due to the overall recession,” the earlier analyst noted, adding that the profits will pick up this year with the economy doing better and also with lower inflation.
The company posted net profits of Rs 482.4 million for the three months ended 31 March 2010 against the Rs 465.3 million for the same period last year.