Saudi corporate earnings to grow 9% in 2012

JEDDAH – GCC corporate earnings would post a muted earnings growth of 8 percent this year 2012 based on the overall net earnings for the second quarter which declined by 1 percent to $13.8 billion compared to the same quarter last year (year on year), the latest research published by Kuwait Financial Centre (Markaz) Wednesday showed.

The report forecast Saudi Arabia to clock a 9 percent growth to $27 billion while UAE is expected to post a growth of 11 percent to $10.8 billion.
Kuwait earnings were expected to contract by 5 percent to $3.9 billion. Banks (38 percent), commodities (23 percent) and telecom (14 percent) account for over 75 percent of earnings.

Banks were seen to post a growth of 8 percent to $21.5 billion, commodities and telecom are likely to contract by 1 percent each, the report said, adding that overall, stock markets should look for triggers other than earnings to support it in 2012.

The overall net earnings for the second quarter of this year declined by 1 percent to $13.8 billion compared to the same quarter last year (year on year). The decline was led by Saudi Arabia and Kuwait companies whose aggregate net incomes dropped 6 percent and 27 percent respectively.
Bahrain also reported considerable weakness though it has a smaller share. Oman, UAE and Qatar firms’ net income grew 56 percent, 12 percent and 8 percent respectively. Among the three largest sectors (banks, commodities and telecom), commodities showed considerable weakness (-30 percent) while banks stayed put (+1 percent) with telecom showing some good signs of growth (+8 percent).

Earnings of Saudi Arabian companies totaled $6.5 billion, a 6 percent decrease compared to the same quarter previous year. SABIC, which reported $1.4 billion in 2Q profits, saw its bottom-line decline by 35 percent due to softening of global petrochemical prices and higher raw materials costs.
Saudi banks earnings increased 11 percent with Al Rajhi Bank reporting a 14 percent growth in net income to $558 million, on account of higher operating income. Telecom sector’s earnings grew 18 percent to $891 million as Etihad Etisalat’s earnings rose 22 percent to $379 million due to higher revenue from data services. Saudi Telecom posted a 7 percent growth in earnings at $642 million

Kuwait corporate earnings dropped 27 percent in 2Q12 to $811 million compared to similar quarter in the previous year. Kuwait saw its earnings recover in the first quarter of 2012 after three consecutive quarters of decline.

However Kuwait corporations haven’t been able to sustain the recovery. Bank earnings declined 25 percent over the year and to $380 million. National Bank of Kuwait’s earnings dropped 41 percent to $142 million due to a $96.4 million provision it took due to the deteriorating operating environment. Telecom companies reported a bottom-line of $310 million (-20 percent) Wataniya’s profits fell almost 50 percent as a result of competitive pressures in the country and negative exchange rate movements in Algeria. Zain earnings dropped 1 percent over the year, settling at $254 million. However, real estate sector performed well with a profit growth of 39 percent.

During 2Q12, UAE companies posted earnings of $3.0 billion, a 12 percent growth compared to similar quarter in the previous year. Banking sector, which accounts for 54 percent of UAE profits, declined 7 percent to $1.6 billion. Emirates NBD which had recovered from its lackluster performance during 1Q12 registered 13 percent fall in net earnings this quarter compared to similar quarter in the previous year. The bank’s 1H12 profits settled 40 percent lower than that of 1H11 due to gain on the sale of a stake in Network International last year. NBAD reported 2 percent growth in net income to $285 million primarily due to lower provisioning. Telecom earnings grew 22 percent to $597 million. Etisalat reported a net profit of $508 million, 17 percent growth buoyed by robust international operations. Real estate continued its recovery with profits of $355 million (1Q12: $342 million, 2Q11: $5 million). While Emaar witnessed a 146 percent growth in earnings to $167 million driven by increase in contribution of subsidiaries, Aldar’s 228 percent increase in profits is led by better occupancy.

Qatar’s earnings continued to grow at a stable rate of 8 percent compared to similar quarter previous year to $2.6 billion. Industries Qatar’s earnings sustained recovery this quarter too with a 3 percent growth over the year to $585 million. Bank earnings continue to benefit from higher government spending with growth of 9 percent to $1.14 billion. Qatar National Bank’s net income ($580 million) grew 17 percent – slowest bottom-line growth in the last 2 years.

Oman’s corporate earnings grew 56 percent to $469 million, one of the strongest showing. Banking sector profits grew to $173 million (+114 percent) aided by Bank Muscat’s net income growth of 19 percent to $91 million.

Bahrain’s corporate profits dropped 29 percent in 2Q12 to $370 million compared to similar quarter previous year. Banking profits plunged 28 percent to $186 million.

The drastic decline in banking income was led by Bahrain Islamic Bank (a loss of $44 million) and a 25 percent and 13 percent decline in earnings of Arab Banking Corporation and United Gulf Bank respectively.
Higher gas costs and lower London Metal Exchange levels impacted Aluminum Bahrain’s bottom line (-49 percent) while Bahrain Telecom’s net profit was affected by lack of growth and stiff competition. The company’s 2Q profit was $49 million (-13 percent). – SG