GCC Corporate posted a healthy set of numbers with overall earnings growth of 26% when compared to 2010. Total earnings, came in at $52.3billion; this is versus our expectation of $54.26billion or a 29% annual growth. FY2011 earnings were driven by strong performance from Commodity companies and Banks, according to Kuwait Financial Centre (Markaz) report.
Aggregate net profits from the commodity sector were $13.3billion, an increase of $3.8billion over 2010, due to increased petrochemical prices and higher volumes. Bank earnings rose 17% in 2011 to $20billion fuelled by higher government spending and lower provisions. Telecom continued to drag overall earnings with a bottom-line drop of 23%. Declining growth in mobile revenues and foreign exchange losses were the prime reasons for this fall. Real Estate sector continued its recovery with aggregate net income coming in at $2.4billion.
GCC aggregate earnings growth of 26% is driven primarily by incremental earnings from Saudi Arabia and UAE. Saudi Arabian companies posted total profits of $24.9billion an increase of 19% over 2010. The increase was mainly due to higher earnings reported by commodity companies which delivered USD 2.9bn in incremental earnings. SABIC’s FY11 net income was up 36% to $7.8billion.
UAE reported a twofold increase in profits led by recovery in real estate and improvement in bank earnings. Real estate improvement was led by Aldar Properties which swung from a $3.4billion loss in 2010 to $175million in 2011 profits due to revenue from sale of assets to the Government.
Net income of Qatari companies increased 19% to $9.7billion due to growth in Commodities and Banks. Industries Qatar reported a bottom-line increase of 45% in 2011 to $2.2billion due to higher petrochemical prices. Government spending on infrastructure boosted banking profits with Qatar National Bank reporting 32% earnings growth to $2.1billion. Real estate profits more than doubled to $1.4billion due to a revaluation gain of $837million booked by United Development Co.
Kuwait lags other countries in terms of visibility, with only 33% of the companies (representing 81% of total market cap) reporting numbers as of second week of March. Most Investment and real estate companies are yet to report numbers. Corporate profits in Kuwait increased 6% in 2011 to $5.5billion; however, when compared on a like-to-like basis, earnings declined 21%. If the extraordinary items at Zain (2Q10) and Wataniya (1Q11) are excluded, Kuwaiti earnings grew 86% on absolute basis and 8% on like-to-like basis.
According to Markaz, 4Q11 was not an encouraging quarter for GCC companies with earnings slipped 17% QoQ, primarily due to weak petrochemical prices and dismal performance by banks on account of last quarter provisioning.
Earnings of Saudi Arabian companies totaled $5.3bn, an increase of 4% YoY but decline of 23% QoQ. SABIC reported an 8% YoY decline in profits to $1.4billion (3Q11: $2.2billion), while Al Rajhi Bank reported 14% YoY growth (-2% QoQ) in net income to $506millio.
During 4Q11, UAE companies posted earnings of $1.2billion. Banking sector profits grew 6% YoY, but declined 29% over the quarter to $957million. 4Q11 Telecom earnings were hit by a $270million write-down in value of Indian operations by Etisalat. Real estate continued its recovery with profits of $252million in 4Q11 (3Q11: $112m, 4Q10: $3.87b).
Qatar largely maintained its earnings momentum with $2.6billion in corporate profits, a growth of 19% over 4Q10 but a 4% decline over the quarter. Qatar National Bank reported a 10% QoQ increase in income to $2.1billion while Industries Qatar’s earnings saw a decline of 19% over the quarter due to lower petrochemical prices and decreased contribution from steel segment.
At 81% market cap visibility, Kuwait corporate earnings grew 23% sequentially to $1billion. Banking profits declined 23% YoY and 29% QoQ to $405million. Telecom companies saw their bottom-line increase to $405million (+6% YoY, +35% QoQ).