The earnings growth rate of publicly-listed companies slowed down in the second quarter of 2023 compared to the first three months of the year due to rising inflation and interest rates while the low base effect of the first quarter of 2022 faded.

In a study, COL Financial reported that “headline earnings of listed companies during the first half of 2023 increased by a median rate of 8.8 percent, slower than the 28.2 percent median growth registered during the first quarter.”

“Recall that the economy was much weaker during the first quarter of 2022 as the Philippines was locked down to control the spread of Covid-19 Omicron variant,” COL Financial noted.

It added that, “meanwhile, the inflation rate increased to an average of 7.2 percent during the first half of 2023. This prompted the BSP to raise rates by another 75 basis points to 6.25 percent to control price increases.”

On the positive side, COL Financial pointed out that, numerous companies continued to outperform expectations at 35.2 percent, with 31.5 percent performing in line with expectations and 33.3 percent performing below expectations.

However, the said percentage was much lower than the 44.4 percent registered during the first quarter.

Power, property companies, and banks were the major earnings growth drivers during the second quarter earnings season. Most outperformers also belonged to these sectors.

Power companies delivered median earnings growth of 36.3 percent during the first half. Excluding one-offs, growth was still strong at 22 percent.

“Growth was driven by numerous factors including higher sales volume, higher average selling price, and fewer outages. Four out of the five power companies that we cover outperformed expectations, while only one performed below expectations,” said COL Financial.

Meanwhile, the brokerage said, “median profit growth of the property companies that we cover reached 24.1 percent during the first half as they continued to benefit from the recovery of their mall, hotel, and resort operations.”

Most also registered a faster growth in their residential and office-for-sale revenues. Three out of the six property companies that COL Financial covers outperformed expectations while the other three performed in line with expectations.

Profits of the nine banks that COL monitors increased by a median rate of 14.7 percent as they benefited from higher net interest income brought about by higher loan demand and net interest margins.

However, the median earnings growth was slower than the 40.6 percent increase registered during the first quarter as loan growth decelerated to 10.5 percent as of end June from 13.5 percent as of end March, and as some banks increased their provisions.

“Compared to our forecast, five out of the eight banks that we cover delivered profits that outperformed expectations while two performed below expectations,” COL Financial said.

On the other hand, consumer companies performed the worst, with median earnings down 2.1 percent. Results disappointed as consumer companies started to feel the impact of normalizing demand and as most suffered from higher raw material and operating costs.

Manufacturers were also badly hit, with profits down by a median rate of 4.5 percent. Retailers also delivered lackluster performance as profits increased by a median rate of only 4.8 percent.

In contrast, restaurants still performed well, with earnings higher by a median rate of 50.7 percent despite the negative impact of higher raw material costs.

Among the 13 companies COL Financial covers, seven delivered weaker-than-expected earnings, while five performed in line with expectations. Only one outperformed its forecast.