Easter terror dulls corporate earnings; elections will further blunt it
View(s):Easter terror has dampened corporate results for the last quarter and firms will feel the brunt of elections-related dreariness in the next quarter, research analysts say.
Lower consumer demand owing to the falling purchasing power has not spared any sector after the April 21 terror, Dimantha Mathew, Head of Research at First Capital noted to the Business Times. “Especially in the manufacturing sector staff wasn’t working for two to three weeks after the bombing. This has hit them badly.”
Analysts noted that the impact of acts of terrorism per million people reduces a developing country’s growth rate by around 1.4 percentage points.
“The impacts will last through the next quarter,” an analyst said. He said that elections in the next quarter will slow the growth and badly effect corporates.
Corporate results released thus far show that firms have had a negativity stemming from the bombings. Dialog’s topline grew 9.3 per cent year on year (YOY) to Rs. 29.1 billion during 2Q’19, owing to continued growth in fixed income and telephone (+90.7 per cent YoY) and television (+23 per cent YoY). This was partly offset by a 3.4 per cent YoY decline in the mobile segment, which was dragged down by externalities such as Easter Sunday incidents including social media blockage and business slowdown.
“The terror attack in April 2019 dampened the country’s demand for Boiler Day Old Chicks (DOCs) significantly lowering the inputs by farmers.
This had a negative impact over group revenue despite the increase in demand for Layer DOCs and export of Parent Stock DOCs to regional countries,” Three Acre Farms PLC said in a statement.
The banking sector was hit with taxes amidst low economic growth.
NDB said that taxes on financial services and debt repayment levy applicable for the period under review was Rs.1, 532 million, whilst the income tax on profits was Rs. 1,256 million. Total taxes led to an effective tax rate of 56 per cent, compared with 43 per cent in H1 2018, primarily driven up by the Debt Repayment Levy introduced in October 2018 and cessation of tax concessions previously enjoyed by the banking sector, under the new Inland Revenue Act which came in to effect from 01 April 2018.
Amidst the low growing economy, foreigners are positive. Tundra Sustainable Fund in a statement said that they got positive contributions primarily from Sri Lanka (2.5 per cent) where the sub-portfolio rose almost 20 per cent during the month on increased optimism that the outcome for the tourism industry may not be as bad as previously feared and hopes for political change post elections. “It is worth noting that the equity market is now higher than before the terrorist attacks during Easter,” it said noting that Sri Lanka is still trading close to the 10-year low on P/B.
“We believe the most important trigger for the stock market will be the elections, the December presidential election and the parliamentary elections expected in the first half of 2020.”
(DEC)