Profits of listed companies jump 47%

KSE-100 index fails to show similar performance, posts just 2% growth in 2021

KARACHI:

The top 100 companies listed at the Pakistan Stock Exchange (PSX) posted a hefty increase of 47% in their net profit to an all-time high at Rs940 billion in the year ended December 31, 2021.

However, the benchmark KSE 100 index - containing the best 100 firms - failed to exhibit a similar performance and ended the year with a nominal growth of mere 2% (or 841 points) to 44,596 points.

The top three sectors that recorded significant growth in their annual profitability during the year under review were commercial banks, oil and gas exploration and production companies and fertiliser manufacturers.

They booked handsome profits in the wake of upward revision in the benchmark interest rate by Pakistan’s central bank and spike in the global energy and domestic fertiliser prices.

The KSE-100 index depicted a dull performance as repeated waves of Covid-19 pandemic kept investors confidence depressed. Besides, a notable delay in resumption of the International Monetary Fund (IMF) $6 billion loan programme, spike in import, rupee depreciation and widening of current account deficit back to unsustainable levels in the year also dented investor confidence.

Arif Habib Limited (AHL) reported that 47% year-on-year jump in earnings in 2021 was fueled by all heavy weight sectors including commercial banks which posted profit of Rs233.1 billion, up 16% year-on-year.

It was followed by fertiliser manufacturing sector which generated earnings of Rs77.3 billion (up by 17%), oil and gas exploration sector (up by 20%), technology (up by 47%) and cement (up by 251%) sectors. Cumulatively these sectors recorded bottom line of Rs52.4 billion.

On the flipside, only two sectors showed decline in earnings during the year under review ie power generation (down 23%) and transport (down 62%), the brokerage house said.

Sectors that led the growth in profitability in percentage terms during the year were textile spinning and textile composite. Cement sector’s profit increased by 251%, engineering by 154%, automobile assembler by 14% and chemicals by 106%. Similarly, the net profit of glass and ceramics sector surged by 71% during the year, it added.

The KSE-100 index rose approximately 2% (or 841 points) to 44,596.07 points as investors bought stocks of technology, banks, fertiliser, power and automobile companies.

“During CY21…technology sector posted the highest contribution (+1,003 points) followed by banks (+921 points), fertiliser (+467 points), miscellaneous (+273 points), power (+131 points), automobile assemblers (+67 points), and chemical (+57 points),” it said. “However, cement sector eroded 373 points from the index followed by oil marketing companies (-347 points) and refinery (-337 points).”

The brokerage house conducted its analysis on KSE-100 index by accounting financial results of 83 companies from among the top 100 firms. The remaining 17 companies are yet to report their financial results. “Companies which have been included in our analysis represent almost 89.3% of the market capitalisation of the benchmark bourse,” AHL said.

Earnings in fourth quarter

Alone in the fourth quarter of 2021, the profit of companies listed at KSE-100 index jumped almost 20% on a year-on-year basis and inched up 0.6% on a quarter-on-quarter basis.

“Earnings growth was led by the highest weighted commercial banks sector amid interest rate hike and reversal in general provisioning made last year in lieu of Covid,” it said. “On the other hand, cyclicals (cements and autos) also witnessed a massive growth in profitability given improved prices.”

Finally, the energy sector (oil and gas marketing companies and exploration companies) also posted a bottom-line jump led by higher oil prices, the brokerage house said.

On the other hand, power generation sector displayed a dip in profitability in lieu of lower share of profit from associate of Hubco and lower capacity payment of Kapco while the engineering sector also depicted decline in earnings led by slowdown in demand, it said.

Published in The Express Tribune, March 2^nd, 2022.

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