Earnings of listed firms drop 41% in 9 months

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    Earnings of listed companies fell by a median rate of 40.9 percent nine months into the year, according to online brokerage firm Colfinancial.com.

    It said 49 of the 62 companies it monitors reported lower earnings, while 13 companies posted losses during the period in review.

    Colfinancial.com said the companies’ weak earnings performance “was largely the result of the enhanced community quarantine (ECQ) which was implemented in Luzon and most parts of the country beginning mid-March up to mid-May to contain the spread of COVID-19 infections.”

    “Although restrictions were eased in the middle of May, operations of most companies were still below normal as several restrictions remained in place during the third quarter and as consumers stayed cautious,” it added.

    Colfinancial.com said the median earnings growth of all sectors, except consumer goods manufacturers, remained negative.

    Profits of consumer goods manufacturers increased by a median growth rate of 7.2 percent as food manufacturers benefited from resilient demand and successful cost cutting measures, it said.

    “Although profits of telcos were down, the median drop was only 2.3 percent as demand for data services (led by home broadband) remained strong. All other sectors reported double digit declines in profitability, with restaurants being the worst hit as all three restaurants that we cover reported losses,” Colfinancial.com said.

    Third quarter earnings were up sequentially compared to the second quarter, “allowing the median drop in earnings to ease to 40.9 percent during the first nine months from 46.1 percent during the first half of the year.”

    It said earnings recovered for most companies as a large part of the country transitioned out of ECQ during the second quarter to the general community quarantine during the third quarter, allowing most businesses to operate at a higher capacity and for consumers to increase mobility.

    “Compared to expectations, several companies continued to disappoint, with the number of companies performing below expectations reaching 24. Although the said number is less compared to the 28 companies that underperformed estimates during the first half, it is still 45.3 percent of all the companies that we cover. Meanwhile, those that performed above expectations reached 17 or 32.1 percent,” Colfinancial.com said.

    Banks’ profit for the nine-month period dropped a median rate of 13.4 percent, given their higher provisioning as they anticipate an increase in bad debts.

    Banks also suffered from weaker fee-based revenues, partly offset by continuous growth of interest income and lower operating expenses.

    Property companies, delivered weaker earnings, with median earnings down 40.9 percent as the residential sales and mall leasing segments were significantly hurt by the COVID-19 pandemic, Colfinancial.com said.

    “The office segment was the industry’s only bright spot as operations remained normal despite the pandemic,” it added.

    Earnings of consumer companies also dropped by a median rate of 37.5 percent with profits largely down as restaurants and retailers suffered from weaker sales
    Retailers’ profits dropped sharply with median profits down 31.9 percent.

    Colfinancial.com said groceries, which showed resilience in the second quarter, had weaker sales in the third quarter as they were negatively affected by consumers’ lower disposable income. Retailers focused on discretionary goods continued to suffer from losses in the third quarter.

    “However, losses narrowed compared to the second quarter amid a rebound in demand brought about by the easing quarantine restrictions. Meanwhile, home improvement stores enjoyed a V-shaped recovery in sales when stores reopened in the third quarter, significantly trimming the decline in profits for the first nine months of the year,” it said.
    Consumer goods manufacturers grew their profits with the median up by 7.2 percent, Colfinancial.com said.

    Power companies’ earnings, on the other hand, fell by 36 percent due to weaker power demand, unplanned outages and lower Wholesale Electricity Spot Market (WESM) prices.

    Colfinancial.com noted the 6.4 percent drop in power demand in the third quarter, still due to the negative impact of the COVID-19 pandemic on economic activity.

    “On the positive side, the drop was much slower compared to the 17.5 percent decline registered in the second quarter. For the nine months, power demand was down by 7 percent,” it said.