37.7% of Listed Sri Lankan Companies Fail to Cover Interest Expenses in 1H 2026: CBSL 📈

Sri Lanka’s non-financial listed sector faced a debt squeeze in 1H 2026 as rising operating costs and interest rates outpaced strong top-line revenue growth, according to the Central Bank of Sri Lanka’s Financial Stability Review 2026. • Overall Financial Performance: - Revenue grew 22.0% YoY (+LKR 199.0 Bn), accelerating from 7.6% growth in 1H 2025. - Cost of sales rose by LKR 152.3 Bn, while operating expenses drained LKR 52.3 Bn. - Net profit declined 6.1% YoY to LKR 136.8 Bn (down from LKR 145.7 Bn). - Aggregate Interest Coverage Ratio (ICR) dropped from 4.2x to 3.7x. • Debt Servicing & Credit Risk: - 37.7% of surveyed firms (204 listed companies) recorded an ICR below 1.0 (up from 33.8% a year earlier), signaling earnings are insufficient to pay interest bills. - Higher market borrowing costs followed the central bank's May 2026 policy rate hike. • Sector Breakdown: - Automobile: Led revenue expansion with a 138.9% YoY surge following the reopening of vehicle imports. - Power & Energy: Revenue boosted by higher energy prices. - Trading & Distribution: Weakest sector with aggregate ICR below 1.0 (0.7x) and negative net profits. - Construction & Engineering: High debt-to-equity levels paired with depressed earnings. - Food, Beverage & Tobacco and Real Estate: Strongest operational performers.