The decline in interest rates would attract more customers to LOLC but this improvement in performance would not be reflected in the next quarter, according to analysts. “The high tax expense could adversely affect the net profit of LOLC as the revenue will not witness a substantial growth in the coming quarter,” Charitha Kamaladasa, Research Analyst Lanka Securities said.
The financial results of LOLC group for the third quarter represent a considerable decline from the same period last year as the performance has been affected by its top line through to its net profit. LOLC Group recorded a Rs 60.5 million profit for the third quarter ending December 31, 2009 compared to the Rs 294.7 million posted for the same period the year before.
The profit from operating activities (down to Rs 257 million for the third quarter from Rs 361.7 million during the same period the year before) has eroded drastically as revenue from installment sales dropped by 99.8% from the corresponding period. The taxation expense (Rs 196 million) has severely affected the net profit for the third quarter period.
An analyst noted that LOLC group has not even maintained last year’s operating performance during the third quarter. “Furthermore the increased operating performance in other leasing companies’ suggests that LOLC has faired much lesser than the industry peers during the third quarter,” he said.
Another analyst said that when petrol was sold at Rs 130 per litre LOLC was netting a profit margin of about Rs 1 per liter. “So obviously the margins are hit with the price reduction. Next quarter will be as bad if the present pricing/ tax structure holds,” he said. |
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