86 top companies post record Rs1.7 trillion profit

Despite inflation, high interest rates, and poor output, profits soar by 25% in FY24

KARACHI:

Pakistan's top 86 companies, listed on the national stock market, have posted a record net profit of Rs1.7 trillion for the fiscal year ending June 30, 2024, marking a 25% increase despite tough economic conditions, including high inflation, record interest rates, and brief rupee devaluation.

The historic growth in profitability in some large-scale manufacturing industries, including cement, fertiliser, automobile, and chemical sectors at the Pakistan Stock Exchange (PSX), contrasts with their poor volumetric output reported by the Pakistan Bureau of Statistics (PBS). This suggests that these industries sold fewer goods at significantly higher prices, allowing them to navigate the economic crisis.

According to a comprehensive report by Topline Research titled "Pakistan Strategy – Record Corporate Profitability in FY24; Earnings Up 25% YoY; Dividend Up 30% in FY24," net profitability in US dollar terms rose by 10%, reaching $5.8 billion compared to FY23.

The earnings surge was primarily led by the banking sector, which posted Rs591 billion in profits, up 35% year-on-year. The fertiliser sector followed with Rs168 billion in net profit, marking a 75% increase, while the cement sector earned Rs115 billion, rising 38% compared to FY23.

Notably, the PSX was the world's best-performing market in FY24, as the benchmark KSE-100 Index soared by 89%, reaching a record high of 78,445 points, up from 41,453 at the start of the fiscal year. The index hit an intra-day record high of 81,850.5 points in recent weeks, closing at 81,484 points on Tuesday.

Topline Research highlighted that banking sector earnings, which accounted for 36% of the KSE-100 index's total profitability, were driven by higher Net Interest Income (NII), bolstered by elevated interest rates throughout the year. The central bank maintained its key policy rate at a record high of 22% from June 2023 to June 2024, before cutting it by 450 basis points to the current 17.5%.

Fertiliser sector profitability surged by 75%, reaching Rs168 billion, thanks to a 2% increase in urea offtake, a 40% rise in DAP sales, and significant price hikes of 59% for urea and 9% for DAP.

The cement sector saw a 38% increase in profits to Rs115 billion, driven by higher retention prices and lower coal costs, despite a decline in local demand.

Other sectors, such as chemicals, engineering, and refineries, experienced slower earnings growth in FY24, with profitability rising by 38%, 27%, and 25%, respectively. The technology sector reported a loss of Rs5.7 billion, primarily due to losses incurred by Pakistan Telecommunication Company (PTC).

The pharmaceutical sector, however, witnessed a 71% increase in profitability, reaching Rs10 billion, up from Rs6 billion in FY23, mainly due to improved margins following the deregulation of non-essential products and reduced finance costs.

Topline Research analysed 86 companies out of the KSE-100, representing 95% of the market capitalisation.

Firms distribute Rs666 billion in dividends

The top 86 companies announced a combined cash dividend of Rs666 billion in FY24, up 30% from Rs512 billion in FY23. This translates to a 40% dividend payout in FY24, compared to 39% in the previous year.

The payout ratio for the oil and gas exploration (E&P) sector increased from 21% in FY23 to 27% in FY24, as companies saw improved cash flows due to higher gas prices. The banking sector's payout ratio also rose from 42% in FY23 to 47% in FY24, thanks to record profitability.

The banking sector remained the largest contributor to dividends, distributing Rs278 billion, followed by the oil and gas exploration sector with Rs118 billion, and the fertiliser sector with Rs90 billion.