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During 1Q12, GCC corporates posted a good set of numbers with overall earnings growth of 4% when compared to 1Q11. First quarter of last year saw Kuwait's Wataniya Telecom book a one-time fair value gain of USD 959mn which boosted earnings. Excluding the one-off item, GCC aggregate corporate profits increased 12% YoY. Total earnings, which came in at USD 14.6bn, were an increase of 45% over 4Q11. The large sequential increase in earnings is due to dismal performance by companies in 4Q11 on account of weak petrochemical prices and increased last quarter provisioning by banks.
Incremental growth in earnings was driven by contributions from Saudi Arabia, UAE and Kuwait (adjusted for one-off). Among sectors, Banks and Real Estate companies delivered good performance with earnings growth of 9% and 61% YoY respectively. Banks continue to dominate GCC earnings representing almost 40% of total profits. Commodity companies reported a mixed set of numbers because of volatile global prices. Commodity earnings decreased 8% YoY but rose 26% sequentially to USD 3.1bn. After a tough 2011, Telecom delivered strong numbers with net income coming in at USD 2.1bn, an increase of 23% YoY (adjusted for one-off) and 11% over the quarter.
Earnings Trend – GCC – 1Q12 (USD mn)
source: Thomson Reuters Eikon, Markaz Research1Q12 Earnings
Earnings of Saudi Arabian companies totalled USD 6.7bn, an increase of 15% YoY and 28% QoQ. SABIC, which reported USD 1.9bn in 1Q profits, saw its bottom-line decline by 5% YoY due to softening of global petrochemical prices when compared to 1Q11. Saudi Banks continued its stable growth with earnings increasing 23% YoY and 27% QoQ to USD 2.0bn. Telecom sector’s earnings grew 70% YoY to USD 853mn as Saudi Telecom’s earnings rose 60% to USD 672mn due to improved operational efficiency.
Kuwait corporate earnings dropped 25% YoY to USD 1.5bn due to Wataniya’s extraordinary item in 1Q11. Excluding the extraordinary item, aggregate profits grew 41%. Kuwait saw its earning recover in the first quarter of 2012 after three consecutive quarters of de-growth. Banks delivered a mixed set of numbers with overall earnings declining 2% over the year but growing 37% over the quarter to USD 555mn. Telecom companies reported a bottom-line of USD 351mn (+10% YoY, -4% QoQ). Real Estate sector, which dented 4Q11 profits with aggregate losses of USD 467mn, reported a net income of USD 127mn in the first quarter.
During 1Q12, UAE companies posted earnings of USD 3.1bn (1Q11: USD 1.6bn, 4Q11: USD 1.4bn). This is the highest earnings during the last 10 quarters. Banking sector, which accounts for 66% of profits, declined 3% YoY, but grew 66% over the quarter to USD 1.6bn. Telecom earnings grew 6% YoY and 87% QoQ to USD 583mn. Real estate continued its recovery with profits of USD 342mn (1Q11: USD 223mn, 4Q11: USD 252mn). While Emaar witnessed a 44% YoY growth in earnings to USD 165mn driven by increase in recurring income, Aldar’s two fold increase in profits is led by recognition from Government sales.
Earnings Growth – Sectoral Trend (USD mn)
After a good growth in 2011, Qatar’s earnings are starting to stabilize. Aggregate profits grew 2% YoY to USD 2.5bn. Qatar’s 4Q11 profits were inflated due to a USD 463mn revaluation gain booked by United Development Company. If that effect is negated, then Qatar’s earnings grew 5% QoQ. Industries Qatar’s earnings dropped 9% over the year to USD 524mn (4Q11: USD 463mn) mainly due to reduced profitability in fertilizer and steel segments. Bank earnings continue to benefit from higher government spending with growth of 13% YoY and 8% sequentially to USD 1.1bn. Qatar National Bank’s net income (USD 551mn) grew 17% YoY – slowest bottom-line growth in the last 2 years.
Oman’s corporate earnings was flat on YoY basis but increased 10% over the previous quarter to USD 380mn. Bahrain’s corporate profits dropped 2% YoY in 1Q12 to USD 410mn. However, profits more than doubled on sequential basis due to large losses reported by Ithmaar Bank (USD 66mn) and Bahrain Islamic Bank (USD 55mn) in 4Q11.
About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre S.A.K. 'Markaz', established in 1974 with total assets under management of over KD 8 88 million as of March 31st, 2012, is the leading and award winning asset management and investment banking institution in the Arabian Gulf Region. Markaz is listed on the Kuwait Stock Exchange (KSE) since 1997 under ticker Markaz.