Corporate profitability was on the rise these past nine-months (Jan-Sept 2018) as revealed by the just concluded autumn financial results reporting season.
The profit after tax (PAT) clocked in by 96 of the 100 companies that comprise the KSE-100 Index amounted to Rs480.4 billion showing collective growth of around 7.8 per cent over net profit of Rs445.5bn earned in the corresponding period of the previous year.
Fertiliser companies were ahead of the rest with earnings showing an impressive surge of 90pc to Rs54bn over PAT amounting to Rs28bn earned in 9MCY17. Other profitable sectors were way behind. Oil and gas exploration companies could shore up earnings by 27pc to Rs130.8bn from Rs103.1bn followed by chemical sector earnings up 19pc and Power Generation and Distribution bottom line boosted by 14pc.
On the flip side, major erosion in overall earnings for the nine-month period was witnessed in the banking sector with earnings down 10pc to Rs113.8bn, from Rs126.8bn year-on-year. The poorer earnings of the banking sector spoilt the profitability of the entire corporate sector since commercial banks now command the highest weight of 24.6pc in the KSE-100 Index.
The decline in earnings of the banking sector was attributable to Habib Bank Limited’s New York settlement payments and adjusted pension costs of large banks. The decrease also represented hefty provisioning expenses booked by certain banks and lower capital gains.
Auto assemblers also posted dismal net earnings for 9MCY18 that declined by nine per cent to Rs23.6bn from Rs26.6bn. A sector analyst said: “Amid an unfavourable environment for autos including weaker rupee, rising inflation and interest rates, the influx of new competition could make the situation more challenging for the existing Original Equipment Manufacturers going forward”.
For the 9MCY18, Oil and Gas Marketing Companies aggregate earnings also dropped nine per cent to Rs19.0bn, from Rs20.9bn. After tax profit of the cement sector stood shaded by eight per cent to Rs33.0bn, from Rs35.7bn year-on-year.
Analysts at brokerage Arif Habib Limited worked out the performance of low weighted sector separately where the collective profit earned by the textile spinning sector increased by a whopping 169pc; followed by leasing sector earnings which jumped up by 89pc; Insurance profits higher by 35pc; Paper and board profit increase by 27pc and that of Food sector reflecting a 16pc glossier bottom line for the latest nine months against the same period in 2017.
Analysts worked feverishly on their calculators to work out the best and the worst performing sectors during the third-quarter (July-Sept) for most fund managers tend to allocate fresh funds on the merits of the latest quarter.
Profitability of the corporate sector for the 3QCY18 increased marginally by 0.8pc over the same time last year, the tiny growth driven by a profit upsurge of 39pc in the oil exploration and production (E&P) sector and by 53pc in the fertiliser sector.
