Corporate profits soared by 43% on a yearly basis during the first quarter of fiscal 2012, led by the two usual heavyweights, exploration and production from the energy sector and banks from the services sector.
Cumulative corporate profits stood at Rs86.5 billion during July to September against Rs60.4 billion in the same period last year, according to a sample of 40 companies that represent 75% of the KSE-100 market cap.
The quarterly result announcement that started on October 17 witnessed a result bonanza as all top companies declared their earnings in two weeks.
However, the flurry of results failed to lift the Karachi Stock Exchange’s benchmark 100-share index in a likewise manner as it gained a mere 0.9% in October and underperformed regional markets by an average 5%.
Domestic political uncertainty and tensions with the US together coupled with global economic woes overshadowed the impressive corporate results, according to a JS Global Capital research note.
Absence of any significant payouts tamed the excitement as well, adds the note.
The energy sector’s performance stood above all but was marred by the circular debt.
The ever-increasing cash backlog rose as the country’s largest oil marketing company Pakistan State Oil reported debt at Rs153.5 billion as of September, 30.
However, the resolution seems to be a step closer as the government plans on issuing up to Rs300 billion worth of bonds in order to clear up the existing inter-corporate circular debt that has financially crippled the energy sector.
Energy sector operations will improve and costly import bill will decrease if the plan is implemented.
JS Global Capital expects earnings growth to settle in the vicinity of 17% in the entire financial year 2012.
Energy Sector
Energy companies cumulative earnings grew 27% to Rs44 billion led by the juggernaut exploration and production companies, which enhanced their production profile. Higher international oil prices and lower turnover tax rate also helped increase profits.
Ogdc
Rs22b - was the highest contribution made by a company in the energy segment, the country’s largest oil and gas explorer witnessed an increase of 31% in profits during the quarter
Services Sector
The banking sector led the charge as the sector grew 38% on the back of increased spreads owing to higher Kibor which rose on an average 81 basis points. The telecom sector’s share is fairly low as most of the cellular giants are not listed on the bourse.
Habib Bank
Rs5.7b - was the highest contribution made by a firm in the services sector, the bank profits surged 32% during the period under review
Manufacturing Sector
Profits rocketed 128% to Rs18 billion by higher domestic demand and price hikes against a hampered and disrupted demand witnessed in the same period last year due to the floods. All fertiliser, local cement and auto sales increased by 30%, 12.2% and 30%, respectively, while a respective average price increase of 42%, 40% and 9% was also witnessed.
Fauji Fertilizer
Rs5.6b - was the highest contribution made by a company in the manufacturing segment, the fertiliser maker’s net profit jumped 194%
Published in The Express Tribune, November 2nd, 2011.
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