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SGX firms report insipid Q1 earnings; nearly one in three posts losses
CORPORATE earnings for the first quarter were hit, to some extent, by provisions and trade war impact.
With the reporting season for non-full year results having ended on May 15, a tally by The Business Times shows nearly one in three Singapore-listed companies chalked up losses. In all, there were 215 companies in the black and 91 in the red.
As at May 15, the 306 companies which had released their first-quarter financial results recorded a combined net profit of S$8.45 billion, up 4 per cent over the same period last year.
KGI Securities' head of research, Joel Ng, said the overall performance was boosted by better-than-expected performances of the three banks. "If you were to exclude the three banks, earnings were actually flat."
The three banks are the big hitters on the local bourse, the only ones among the 306 companies to post net profits in the billion-dollar range.
Head of equity research at CGS-CIMB, Lim Siew Khee, said higher trading income at the three banks boosted their results.
"The banks had better mark-to-market trading income because our stock market did well this quarter." The Straits Times Index is up about 4.5 per cent this year, mirroring the rise in total earnings.
But she cautioned that this elevated level of trading income cannot be sustained.
"The second quarter will be worse than the first... In addition, loan growth will be lower than last year, with net interest margins (NIM) increasing by smaller magnitudes compared to last year now that the Fed will no longer be raising its benchmark lending rate this year.
"This will affect the repricing of mortgages. You will probably see more NIM increases in the first half of the year compared to the second half for banks."
City Developments also exceeded most analysts' expectations, given that its first-quarter net profit jumped 134 per cent to S$200 million, boosted by a S$144 million pre-tax gain from the divestment of Manulife Centre.
Not all these corporate results were included in BT's tally, which only included companies that reported their first-quarter results in the January-to-March period.
Among companies that were not reporting Q1 results, but exceeded expectations in the latest reporting period was Thai Beverage.
Although its second-quarter net profit fell 12 per cent to 5.79 billion baht (S$249 million), from a restated 6.59 billion baht, it was better than Phillip Securities Research expected. For that, ThaiBev had its Saigon beer brewer Sabeco to thank. Sabeco had a 15 per cent rise in sales volume as it continued to gain market share.
For CGS-CIMB, Singapore Airlines exceeded expectations, despite posting a 28 per cent fall in fourth-quarter earnings to S$202.6 million, as the airline incurred lower-than-expected operating costs and posted a better joint venture and associate performance.
CGS-CIMB's Ms Lim noted that there were a number of big caps that were affected by provisions - balance sheet items representing funds set aside by a company as assets to pay for anticipated future losses.
For example, Singapore Post posted a fourth-quarter net loss of S$75.1 million, reversing from a net profit of S$31.8 million from the previous year. This was due to an impairment for the US businesses that it is planning to sell, as well as provision for restructuring of overseas operations.
Consumers and commodity firms also did not do well, she said.
Two of the big misses for the brokerage were First Resources and Indonesia agri-food firm Japfa. "For plantation firms, it was due to lower consumer commodity prices and also a bad season of production, but we expect recovery in the second half."
She added that property developers seemed to have held their ground despite the lingering effect of last year's cooling measures on residential property purchases.
Mr Ng from KGI noted that there has been a pullback in spending.
"Purchasing managers' index numbers have been coming down; global growth is definitely slowing down this year. When we meet management, outlook is a bit more cautious this year, and a lot of overall topline growth has actually declined."
As for the upcoming quarter, the effect of the US-China trade war could come into play in a bigger way, affecting trade-related businesses such as logistics and cargo.
Mr Ng said small-caps tech manufacturers are starting to slow down in their performance on a quarter-on-quarter basis.
"Trade war concerns started to have an impact in Q3 last year, and there was also an inventory build-up in the second half of last year, so tech manufacturers are still going through an inventory adjustment that may continue into second-quarter results."
READ MORE: Q1 results ended March 2019