GCC corporate earnings reached $12.8billion, a decrease of seven per cent in second quarter of 2011 as compared to the same period last year, according to a report by Kuwait Financial Centre known as Markaz.
The total earnings reached $12.8billion was less than the profits posted during the previous quarter (1Q11) by 7%. In 1H11, the GCC corporate earnings had shown to $ 26.5billion an upswing of 5% compared to $25.3billion 1H10.
Citing the possible reasons behind the decline, Markaz report suggested that the corporate earnings declined due to weak performance by the telecom sector in the region. However, it added, banks and commodity companies continued to perform strongly. “The region’s continued dominance as a petrochemical hub, global recovery, and spikes in commodity prices supported the performance of companies across the region,” the report said.
Aggregate net profits from the commodity sector were $3.4billion (+54% YoY, +4% QoQ). Amongst sectors, banking continued to deliver the highest profits, at $5billion. Robust demand and access to low cost funds improved spreads in this quarter. Telecom sector registered 66% YoY decline in net income due to Zain’s one time profit from discontinued income reported in 2Q10. Excluding this one-time adjustment, the sector’s earnings fell by only 11% YoY. Real Estate sector recovered from the slump experienced last year and reported a profit of $386million in 2Q11, up 127% YoY.
Saudi Arabian companies posted a total profit of $12.7billion during 1H11, an increase of 25% YoY. The increase was due to higher earnings reported during the 2Q11 by all the sectors across the board. Earnings of Kuwaiti companies during the 1H11 were down 33% YoY to $2.9billion. The decline in earnings was mainly due the decreased profits reported by the Telecommunication sector in Kuwait. UAE companies reported a profit of $5.2billion during the half year, an increase of 5% YoY. The surge in the banking sector performance during the year supported the increased profits.
Qatar earnings during the first half of the year was $4.3billion, almost flat compared to the previous year. The banking and the commodities sectors came up with good results during the year. However, the performance of the telecommunication sector was disappointing. Oman’s corporate earnings declined 16% YoY during the first half of the year to $0.8billion. The decrease in profit was mainly due the low profits reported by the Banking and the Telecommunication sectors. On a like-to-like basis, Bahrain’s corporate reported a profit of $510million in 1H11, an increase of 5% YoY. The increase in profit was due to the improved results posted by the banking sector in Bahrain.
Earnings of Saudi Arabian companies totaled $6.9billion, an increase of 28% YoY and 20% QoQ. SABIC, which reported $2.2billion in 2Q profits, led the growth which was driven by higher volumes and prices. Al Rajhi Bank reported net income of $491million, up 4% YoY. Saudi Telecom’s net profit increased 9% YoY to $602million. The increase in net profit is mainly on account of higher sales and lower operating expenses in this quarter.
On a like-to-like basis, Bahrain’s corporate reported a profit of $270million in 2Q11, an increase of 28% YoY and 13% QoQ. On like-to-like basis, banks reported an earnings growth of 63% on YoY basis. Ahli United Bank grew its earnings over the year by 20% to $84million. Net income of Bahrain Telecom suffered, declining 5% YoY, though increasing by 22% on a QoQ basis.