Total GCC earnings falls 4.7%

KUWAIT: Total earnings for GCC-listed companies decreased 4.7 percent y-o-y in Q1-19 to $17.0 billion from $17.9 billion in Q1-18. All GCC markets barring Kuwait and Dubai witnessed a decline in Q1-19 earnings. Bahrain Bourse saw the biggest y-o-y decline in earnings by 20.8 percent to reach $485.4 million and also the second largest net profits drop in absolute terms after Saudi Arabia. Q1-19 net profits of Saudi Arabian listed corporates, which made up 36.9 percent of aggregate GCC quarterly profits, declined 9.2 percent to $ 6.3 billion.

In terms of sectors at the GCC level, three of the top 5 largest sectors by market cap including Materials, Real Estate and Capital Goods recorded double digit decline in their Q1-19 net profits resulting in decline in aggregate quarterly profits for the GCC during Q1-19. On the other hand, the Banking and the Telecommunications services sectors saw single digit growth in Q1-19 net profits that only partially offset the decline in aggregate earnings.
The banking sector represented 58 percent of the total GCC earnings in Q1-19. All six countries of the GCC saw their Banking sector earnings surge in Q1-19 recording a y-o-y growth of 9.1 percent to reach $ 10.0 billion for the region. Dubai’s Banking sector witnessed the biggest percentage increase in y-o-y profits for Q1-19, reporting a 17.4 percent jump in net profits followed by Saudi Arabia with a growth of 9.1 percent. The top three banks in the GCC, QNB, FAB and NCB, recorded a combined profit growth of 4.5 percent during the quarter.

The utilities sector was one of the biggest drags on overall profitability during the quarter lead by Saudi Arabian utility names, particularly Saudi Electricity Company which saw its y-o-y losses increase to $397 million in Q1-19 as compared to $323.7 million in Q1-18. The GCC Materials sector also reported declining profitability that reached $1.6 billion in Q1-19 as compared to $ 2.8 billion in Q1-18. Saudi Arabia’s Material sector lead GCC pack in terms of Q1-19 net profit fall in absolute terms. SABIC saw its net profits fall from $1.5 billion in Q1-18 to $908.6 million Q1-19, a fall of nearly $560 million in absolute terms.

GCC corporate earnings report
Among the six biggest sectors in the GCC market by market capitalization (Banking, Materials,
Real Estate, Telecom, Capital Goods and Utilities) only two sectors, Banking and Telecoms,
managed to grow earnings during Q1-19 as compared to corresponding quarter in 2018. The share of profit by the aforementioned sectors remained in line with last years at around 88 percent. The biggest decline was recorded in the Utilities sector with an aggregate loss of $295 million in Q1-19 as compared to a lower aggregate loss of $185 million during Q1-18. Profits for the sector was once again dragged down by Saudi Electricity Company which reported a loss of $397 million in Q1-19 as compared to a slightly lower loss of $323.7 million during Q1-18. Five out of the 13 companies in the GCC utilities sector posted losses during the quarter.

The GCC banking sector accounted for the lion’s share of the aggregate earnings at 58 percent followed by a distant second Telecom sectors at 11.5 percent. In the GCC Banking sector, out of the 64 banks that reported earnings, merely 16 posted a y-o-y decline in earnings during the quarter. The share of top 10 banks in quarterly profits of the sector stood at 60 percent, almost in line with the share during Q1-18. The performance of companies in the Telecom sector was mixed during the quarter however, higher y-o-y profits from STC, Etisalat and Zain pushed the overall profits for the sector.
The Real Estate sector in the GCC accounted for the fourth largest share of net income. The sector continues to cause volatility in equity markets in the UAE due to continued oversupply in several segments of the market. During the quarter, Qatar was the only significant market where real estate companies recorded growth in profits. Dubai continues to account for the bulk of sector profits, but after recording a growth in profit in 2018, Dubai’s real estate sector earnings declined 12.5 percent during Q1-19.

Boursa Kuwait-listed companies reported a net profit increase of 6.6 percent during Q1-19 that reached $1.67 billion compared to $1.56 billion during Q1-18. Among the major sectors Banks, Capital Goods, Diversified Financials, Telecommunication contributed to the rise in profitability of the exchange. The Biggest impact on higher aggregate stock exchange profits came from the Banking sector which recorded a profit growth of 7.4 percent that reached $811.1 million in Q1-19 from $755 million in Q1-18. Five out of the ten listed Kuwaiti banks reported double digit growth in profitability during the quarter while CBK’s net profit plunged almost 90 percent despite flat net interest income led by higher provisions and operating expenses during the quarter.
After the Banking sector, the Capital Goods sector was the biggest contributor in terms of earnings growth, led by National Industries Group which reported a 45.7 percent y-o-y growth in profit in Q1-19. The group’s profits reached $89.05 million supported by a partial divestment of an associate. Gulf Cable and Electrical Industries almost tripled its Q1-19 profits on the back of higher investment income.

The diversified financial sector recorded a profit growth of 17.1 percent that reached $172.1 million in Q1-19 on the back of higher profits recorded by some of the bigger players in the sector. Telecom earnings also recorded positive earnings during Q1-19 with a growth of 6.3 percent to reach $215.2 million. This surge was solely led by Zain that recorded a net profit growth of 15.1 percent on the back of higher revenues. Meanwhile, the insurance sector saw top five of the eight players recording strong growth in earnings during Q1-19 that was offset by decline in profits for the smaller three players in the sector. The sector profits stood at $52.8 million in Q1-19, a 15.8 percent rise from Q1-18. Kuwait Insurance reported an 18.4 percent y-o-y jump in profits that reached $19.4 million driven by better operating performance combined with higher investment earning.

Saudi Arabia
The total net profit for the companies listed in the Saudi Arabia declined by 9.2 percent to $6.3 billion in Q1-19 against $6.9 billion in Q1-18. The growth was primarily led by the Banking sector which recorded a profit growth of 12.7 percent which was partially offset by a profit decline of 43 percent for the Materials sector. Aggregate profits for the exchange was also negatively affected by Consumer Durables, Pharmaceutical and Real Estate sectors. Within the banking sector, Riyad Bank reported an almost 50 percent jump in net profit that reached $438.5 million in Q1-19 on the back of higher fee income.
On the other hand, profit decline in the material sector was primarily on the back of a 38.1 percent drop in profits for SABIC that reached $908 million in Q1-19 led by lower average selling prices. Furthermore, Maaden posted losses of $ 33.9 million in Q1-19, against a net profit of $170.1 million in Q1-18. The decline was due to low prices of all products and decreased sales volume. Nevertheless, SAFCO reported a 41.4 percent y-o-y increase in profits during the quarter.

Net profits for DFM-listed companies recorded a modest rise of 1.4 percent in Q1-19 to reach $2.7 billion compared to $2.6 billion in Q1-18. In terms of sectors, three out of the five largest sectors; the Real Estate sector, the Telecommunications sector and the Capital Goods sector posted y-o-y decline in net profits. However, the Banking Sector and the Insurance sectors Q1-19 gains in net profits buoyed the overall net profits for the exchange.
The banking sector recorded 17.4 percent jump in Q1-19 net profits to $1.5 billion, the biggest percentage rise in profits among GCC banking sectors. Emirates NBD contributed the largest increase in net profits with a sequential and y-o-y growth of 15 percent to reach $746.8 million driven by loan growth and stable margins. Meanwhile, Emirates Islamic Bank delivered the largest y-o-y increase in profits that almost doubled in Q1-19 to $ 111.9 million up from $56.8 million in Q1-18. The increase in profitability was attributed to higher funded income, lower cost and balance sheet growth.

Abu Dhabi
The total net profit for listed companies on the Abu Dhabi Stock Exchange for Q1-19 decreased 2.6 percent to $2.6 billion compared to Q1-18 profits of $2.7 billion. The diversified financial sectors and the real estate sector were the main contributors which dragged down the exchanges’ Q1-19 net profits. Moreover, other large market cap sectors such as the banking sector and the telecommunications services sector only managed to deliver modest increases in Q1-19 profits of 2.4 percent and 2.1 percent, respectively.
In the diversified financial sector, Waha Capital posted a loss of $15.7 million for Q1-19 compared with a profit of $29.2 million during Q1-18. The company suffered a loss of $45.1 million in its private investments mainly driven by the adjustment and reassessment of the value of its AerCap Holdings recoverable amount.

The real estate sector was the second largest contributor of the fall in profits of the exchange with profits declining by 18 percent y-o-y to $156.9 million in Q1-19 as compared to $191.5 million in Q1-18 largely led by Aldar Properties’ 17.3 percent drop in earnings.

Net profit for Qatari-listed companies declined during Q1-19 by 4.1 percent y-o-y to reach $2.88 billion primarily led by fall in profits for the capital goods sector that almost halved during the quarter. Banks continued to outperform other sectors with a 4.0 percent rise in the net profit to reach $1.69 billion in Q1-19, accounting for 58.8 percent of the overall exchange profits during the quarter. QNB reported a 4 percent y-o-y increase in Q1-19 that reached $ 980 million. Quarterly net profit for Qatar Islamic Bank grew by almost 10 percent y-o-y to reach $188.2 million in Q1-19 compared to $171.7 million in Q1-18.

Total net profits for companies listed on Bahrain Bourse decline 20.8 percent in Q1-19 to $485.4 million compared to $ 612.6 million in Q1-18. The two largest sectors by market cap, the Banking sector and the Telecommunications Services sector both recorded robust increases in Q1-19 net profits. However, this was primarily undone by the loss in the Capital Goods sector. Aluminum Bahrain declared Q1-19 loss of $42 million compared with its $90 million profits in Q1-18. The company’s turn from profit to loss was attributed largely by the impact of higher alumina prices on top of a challenging market. On the other hand, Bahrain Bourse’s Banking sector and the Telecommunications sector, the two largest sectors of the exchange by market cap, saw their Q1-19 net profits rise 6.3 percent and 14.8 percent, respectively. The Banking sectors Q1-19 earnings increased by 6.3 percent to $407.4 million from $383.2 million in Q1-18. Al-Ahli United Bank was the largest earnings contributor of the sector for the quarter in terms of absolute net profits. The bank reported a net profit of $192.9 million for Q1-19 compared to $ 174.7 in Q1-18 due to growth in operating income which was mainly driven by an increase in net interest income attributed to growth in loans.

Total net profit for companies listed in the MSM exchange fell 3.7 percent to $421.6 million in Q1-19 compared to $437.8 million in Q1-18. The biggest sector of the exchange, the Banking sector only saw its Q1-19 net profits rise 2.8 percent to $257.6 million while the diversified dinancial sectors total net profits for Q1-19 fell 46.5 percent to $28.1 million down from $52.5 million in Q1-18, dragging the rest of the market down. In the Diversified Financial sector, Dhofar International Development and Investment Holding Co posted the $7.5 million loss in its Q1-19 results, the biggest loss in the sector, followed by Gulf Investment Services Co which also registered a loss of $4.4 million.

KAMCO GCC Corporate Earnings Report

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