(MENAFN- Arab Times) The GCC's corporate earnings fell 2.9%YoY to USD36.0bn in 1H15. This was ascribed to weakness in earnings of KSA (-12.3%YoY), Oman (-4.9%YoY), and Abu Dhabi (-3.7%YoY). The KSA contributed 5.3% to the accumulated fall in the GCC's earnings, partly offset by Qatar (15.8%YoY), which added 2.4% to the region's incremental earnings. Apart from Qatar, Dubai (3.7%YoY), Bahrain (2.1%YoY), and Kuwait (1.2%YoY) reported improved earnings in 1H15. Though Abu Dhabi and Dubai portrayed a reverse pattern in corporate earnings, combinedly the UAE reported a 0.6%YoY fall in corporate earnings in 1H15. Overall, the Banking sector outperformed all sectors across bourses.
KSA remained the major contributor to the overall earnings of GCC (38.7%); hence, a fall in KSA's earnings severely impacted the overall region's consolidated earnings. KSA was followed by UAE (26.7%), Qatar (18.3%), Kuwait (8.4%), Bahrain (5.0%) and Oman (2.9%). Within UAE, Dubai accounted for 11.4% of the total GCC earnings and Abu Dhabi accounted for 15.2% of the total GCC earnings.
Although the UAE was the best-performing market in the GCC in 2014, Qatar outperformed it in 1H15. Qatar's performance was attributed to strong growth in the Real Estate sector's earnings, which accounted for 20.5% of the consolidated earnings of the country and added 16.6% to the incremental earnings growth of the bourse. Infrastructure growth in the country was robust, led by construction developments related to the FIFA 2022 World Cup. Apart from Real Estate, the Banks & Financial Services sector fuelled the growth of the bourse's consolidated earnings.
Bahrain
Bahrain Stock Exchange (BSE)'s consolidated earnings rose 2.1%YoY to USD1.8bn in 1H15, primarily driven by earnings growth in the Industrial and Commercial Banks sectors; however, a fall in the Investment and Hotels, and Tourism sectors partially offset the rise.
The Industrial sector's earnings rose 105.6%, contributing 5.2% to the incremental growth in total earnings. The earnings growth was led by Aluminium Bahrain Co. (107.0%YoY), which contributed 104.6% to the incremental growth in the sector's earnings. Its total sales for 1H15 rose 8.0%YoY to BHD405.9mn. This impact was further magnified by higher other income and improved operating margins.
Commercial Banks' earnings increased 6.3%YoY, which contributed 3.0% to the bourse's earnings growth. The growth was majorly ascribed to higher earnings from Al Ahli United Bank (6.0%YoY), which contributed 4.9% to the sector's incremental earnings. This was partly offset by lower earnings from Al Salam Bank (-81.8%YoY).
Earnings for the Services sector rose 3.1%YoY, contributing 0.2% to the total incremental earnings growth. This was driven by a 10.8%YoY increase in net profit of Bahrain Telecommunication Company (10.8%YoY), which contributed 5.6% to the incremental earnings of the sector. The company managed to reported higher earnings despite a decline in revenue and share of profit from associates. Impact of lower revenue was offset by lower impairment losses, higher finance income and decline in finance expenses. Besides this, strong growth earnings of 49.3%YoY for Bahrain Duty Free Shop Complex Co., led to a 3.6% incremental growth in earnings for the sector. The growth in profit was driven by higher top-line along with expanded operating margins. Moreover, a strong increase in investment income also contributed significantly to the bottom-line growth for the company. Nevertheless, the rise was slightly offset by lower finance income.
The Investment's sector earnings declined 16.9%YoY, reduced the bourse's incremental earnings by 6.1. This fall was majorly ascribed to a 29.9%YoY decline in net profit of Arab Banking Corporation, which contributed 16.7% to the overall decline in the sector. The fall in net profit was attributed to decline in both net interest income and also other operating income, partly offset by lower tax expense related to the company's foreign operations. This decline was partly offset by higher earnings from Albaraka Banking Group, which posted 5.2%YoY growth in net profit, contributing 1.7% to the incremental earnings of the sector. The growth was driven by addition of 24 new branches in 1H15, taking the total to 573.
Kuwait
Kuwait Stock Exchange (KSE)'s consolidated earnings grew 1.2%YoY to USD3.0bn in 1H15, primarily led by the Real Estate sector, which rose 34.8%YoY in 1H15 and contributed 3.1% to the growth in consolidated earnings. In addition to the Real Estate sector, the YoY rise in the Financial Services, Insurance, Consumer Goods, and Consumer Services sectors was 35.6%, 71.7%, 28.6%, and 33.0%, respectively, during the period, contributing an overall 5.9% to the growth in consolidated earnings. The Telecommunications sector was the key loser (-37.4%YoY), followed by the Oil & Gas (-65.5%YoY) and Basic Materials (-58.1%YoY) sectors.
Earnings in the Real Estate sector rose largely due to an increase in the earnings of Alargan International Real Estate Company (profit growth of 19.7x), which contributed 30.6% to the sector's overall incremental earnings growth. The gains were mainly ascribed to higher rental income and increase in realized gains from sale of investment properties, but were partly offset by higher general and administrative expenses. Moreover, earnings growth was ascribed to increase in the earnings of Arkan Al-Kuwait Real Estate Co. (167.5%YoY), which contributed 3.2% to the sector's incremental earnings growth. Earnings growth was mainly driven by higher sale of investment properties. The gains were partly offset by a decline in earnings of Sokouk Holding Co. (-92.6%YoY), which offset the sector's incremental earnings by 2.9%. The fall was mainly led by lower earnings from associate companies, and higher staff costs and general and administrative expenses.
Earnings growth in the Financial Services sector was driven by strong growth in Alimtiaz Investment Co. (net profit growth of 149.1x), contributing 10.4% to the sector's incremental earnings growth. The rise was driven by higher gains realized from selling investments available for sale as well as gains from sale of investments in associates. This was partly offset by lower total operating revenue. These gains were partly offset by Aayan Leasing & Investment Co.'s lower profit (-39.0%YoY), which contributed 4.9% to the incremental earnings decline. This fall was due to a decline in operational profits from real estate activities as well as lower real estate financing revenue.
The decline in the earnings of the Telecommunications sector was majorly ascribed to lower earnings of Mobile Telecommunications Co. (-29.9%YoY), which contributed 22.5% to the decline in the sector's incremental earnings. The fall in earnings was due to a decline in operating revenue amid intense competition, and economic and political instability in Iraq (a key market). Moreover, National Mobile Telecommunications Co.'s net profit fell sharply (-60.8%YoY), contributing 15.1% to the overall incremental earnings decline. The fall was due to decline in total operating revenue. Moreover, foreign exchange losses amid currency movements in Algeria and Tunisia also weighed significantly on the company's bottom-line. The decline in net profit was slightly offset by higher net profit of Hits Telecom (37.5%YoY), though its contribution to the sector's earnings is very less compared to the two major players.
Oman
Corporate earnings for Muscat Securities Market (MSM) declined 4.9%YoY to USD1.0bn in 1H15 due to the Services & Insurance (-9.4%YoY) and Industrial (-20.4%YoY) sectors, partly offset by gains in the Banks & Investment (3.3%YoY) sector.
Decline in Services & Insurance sector's earnings contributed 3.7% to the overall incremental decline in the overall market. The fall in the sector was majorly ascribed to lower earnings from Oman Telecommunications Co. (-7.0%YoY), which contributed 2.8% to the incremental earnings decline in the sector. This fall in earnings was majorly led by an increase in operating expenses as well as lower other income. Moreover, Renaissance Services Co. incurred a net loss of OMR1.9mn compared to a net profit of OMR10.9mn, weighing significantly on the sector's earnings. This was ascribed to higher cost of sales, operating expenses, and finance charges.
Decline in the Industrial sector's earnings contributed 2.8% to the decline in the sector's incremental earnings. The fall in the sector's earnings was majorly led by lower earnings of Raysut Cement (-29.7%YoY), which contributed 8.0% to the overall decline in the sector's earnings. This was mainly due to lower revenue and decline in investment income along with a fair value loss on financial assets at fair value. Moreover, Oman Cement reported a 40.1%YoY decline in net profit, contributing 6.3% to the incremental decline in the sector's earnings. This was mainly ascribed to lower revenue, higher operating expenses, and a decline in other investment income and interest income. Furthermore, decline of 86.6%YoY in the net profit of Oman Fiber Optic Co. led to a 5.8% fall in the incremental earnings of the sector. This was mainly ascribed to decline in revenue and contraction in operating margins. Moreover, the previous comparative period (1H14) included a one-off gain related to income from insurance, which was net there in this period (1H15).
Gains in the Banks & Investment sector were driven by 21.9%YoY growth in National Bank of Oman's net profit, which contributed 2.5% to the incremental earnings growth in the sector. This was driven by an increase in both net interest income as well as net income from Islamic financing and investment activities. Moreover, Bank Muscat also reported a decent earnings growth of 4.0%YoY, contributing 1.8% to the incremental earnings growth in the sector. This was mainly ascribed to higher operating income and increase in share of results from associates. Bank Dhofar reported a 10.4%YoY increase in net profit, which contributed 1.1% to the incremental earnings growth of the sector. This was driven by increase in both net interest income and also net fees and investment income, partly offset by decline in other income.
Qatar
Qatar Exchange (QE)'s corporate earnings increased 15.8%YoY to USD6.6bn during 1H15, driven by the Real Estate (229.4%YoY) and Banks & Financial Services (8.4%YoY) sectors. These two sectors together contributed 20.4% to the market's overall incremental earnings. Besides, other sectors which posted gains include Transportation (19.2%YoY) and Consumer Goods & Services (8.0%YoY). The gains in earnings reported by these sectors were partly offset by a decline in earnings in the Telecommunications (-41.2%YoY), Industrial (-9.6%YoY), and Insurance (-1.8%YoY) sectors.
Strong gains in the earnings of the Real Estate sector, which contributed 16.6% to incremental earnings growth in the market, were mainly driven by higher earnings of Barwa Real Estate (14.5x net profit growth). This was mainly ascribed to a one-off capital gain related to sale of properties. Moreover, Ezdan Real Estate's net profit rose strongly (19.5%YoY), contributing 9.4% to the sector's incremental earnings growth. This was driven by higher rental income and other income as well as a gain due to revaluation of investment properties.
Higher earnings in the Banks & Financial Services sector were driven by strong growth in net profit of Qatar National Bank (10.5%YoY), which contributed 5.5% to the sector's incremental earnings growth. This was driven by a higher operating income and an increase in income from associates. Furthermore, Qatar Islamic Bank also reported an earnings growth of 23.4%YoY, contributing 1.8% to the incremental earnings growth in the sector.
Gains in the Transportation sector was driven by higher net income of Qatar Navigation Co. (25.6%YoY), contributing 12.9% to the incremental earnings growth of the sector. Also, Qatar Gas Transport reported a strong net profit growth of 10.2%YoY, which contributed 4.4% to the incremental earnings growth of the sector.
The gains in the above sectors were partly offset by a weak Telecommunications sector, which offset the incremental earnings of the bourse by 3.4%. This was due to a 41.2%YoY decline in Ooredoo's net profit. This was mainly ascribed to lower revenue. Moreover, the company reported higher operating expenses and depreciation expenses.
Decline in earnings in the Industrial sector were majorly ascribed to an earnings dip in Industries Qatar (-15.5%YoY), contributing 8.4% to the overall decline in the sector's incremental earnings. This was due to lower revenue as well as a loss from associates (compared to a profit from associates in the comparable period of the previous year).
Saudi Arabia
In 1H15, TASI's consolidated earnings plummeted 12.3%YoY to USD14.0bn, primarily due to lower earnings recorded by the Petrochemical Industries sector (-30.9%YoY), which contributed 9.6% to the decline in the sector's consolidated earnings. Apart from Petrochemical Industries, Energy & Utilities (-96.4%YoY) and Telecommunication & Information Technology (-26.1%YoY) added 4.6% and 2.2%, respectively, to the accumulated fall in the bourse's earnings. On the other hand, consolidated earnings of the Banks & Financial Services sector rose 6.7%YoY and contributed 44.2% to the bourse's total earnings, which partially offset the fall in overall earnings. Amongst sectoral indices, ten sectors witnessed rise in their 1H15 earnings, while five recorded a fall in their total earnings.
Earnings of the Petrochemical Industries sector plummeted due to a fall in earnings of Saudi Basic Industries Corp. (-21.6%YoY), which added 15.0% to the dip in the sector's earnings. The company's net income decreased due to lower average sales prices despite reduction in the cost of sales. National Industrialization Co.'s bottom line tumbled from a net profit of SAR729.1mn in 1H14 to a loss of SAR440.2mn in 1H15, adding 6.3% to the overall fall in the sector's earnings. Another heavyweight, Yanbu National Petrochemicals Co.'s earnings recorded a 56.2%YoY fall in 1H15, which added 3.5% to the accumulated fall in the sector's earnings. Saudi Kayan Petrochemical Co.'s net losses increased to SAR605.1mn in 1H15 from SAR123.2mn in 1H14, adding 2.6% to the overall fall in the sector's consolidated earnings.
The Energy & Utilities sector's earnings declined due to a 98.9%YoY fall in the earnings of Saudi Electricity Co., owing to the inclusion of the same non-recurring items from some debt settlement. Earnings from the Telecommunication & Information Technology sector decreased due to a 2.6%YoY dip in the earnings of Saudi Telecom Co.
The earnings of another index heavyweight in the Banks & Financial Services sector grew 6.7%YoY due to a robust 196.7%YoY rise in the earnings of Bank Al Jazira, owing to an increase in revenue and one-off gains. Notably, during the period the bank sold some land and recorded SAR573mn of extraordinary gains. Banque Saudi Fransi (18.7%YoY) added 1.5% to the sector's consolidated earnings growth. Expansion in the bank's bottom line was driven by higher operating income. On the other hand, Al Rajhi Bank disappointed with a 5.3%YoY fall in earnings.
UAE
The UAE reported a slight fall (-0.6%YoY) in 1H15 corporate earnings. The consolidated earnings of the Dubai bourse rose 3.7%YoY, while for Abu Dhabi; it reduced 3.7%YoY during the same period.
Abu Dhabi's corporate earnings decreased 3.7%YoY to USD5.5bn in 1H15. This was due to a fall in the earnings of Energy, Telecommunications, and Insurance sectors, which added 11.3% to the accumulated fall in the bourse's earnings, was partially offset by earnings growth in the Banking sector, which offset the accumulated fall by 6.0%.
Out of the nine sectors, Insurance (-117.6%YoY) was the key loser, followed by Energy (-111.3%YoY), Telecommunications (-17.9%YoY) and Investment & Financial Services (-12.1%YoY). Amongst the gainers, Services (68.7%YoY) topped the list, followed by Consumer Staples (58.1%YoY), Industrial (15.8%YoY), Banks (10.8%YoY) and Real Estate (9.5%YoY). Banks are the highest contributor to the consolidated earnings (63.6%), followed by Telecommunications (18.9%), Real Estate (5.9%) and Investment & Financial Services (5.7%).
The Energy sector witnessed a loss of AED96.0mn in 1H15, compared with net profit of AED846.0mn in 1H14 due to a fall in the earnings of Dana Gas Co. and Abu Dhabi National Energy Co. Dana Gas recorded a 79.3%YoY fall in 1H15 earnings, while Abu Dhabi National Energy Co. incurred a loss of AED165.0mn in 1H15, compared with a profit of AED513.0mn in 1H14 due to implications of the falling oil price.
The Telecommunications sector recorded a 17.9%YoY fall in earnings due to an 18.1%YoY decline in the earnings of Emirates Telecommunication Corp. Earnings in the Insurance sector reduced due to the Abu Dhabi National Insurance Co.'s loss of AED298.8mn in 1H15 compared with AED104.4mn profit in 1H14. The company added 79.7% to the accumulated fall in the sector's earnings. Al Wathba National Insurance Co. (-68.2%YoY) added 20.4% to the fall in the sector's earnings.
Heavyweight banks partially offset the bourse's losses with a 10.8%YoY rise in earnings. Abu Dhabi Commercial Bank (25.9%YoY) and National Bank of Umm Al Qaiwain (125.9%YoY) added 4.5% and 2.0%, respectively, to the incremental earnings of the sector.
Dubai's corporate earnings expanded 3.7%YoY to USD4.1bn in 1H15. The upside was driven by the Banking sector (32.0%YoY), which contributed 12.4% to the bourse's incremental earnings. This was partly offset by another index heavyweight, the Real Estate and Construction sector (-9.9%YoY), which accounted for 32.5% of the consolidated earnings of the bourse. Investment and Financial Services (-45.2%YoY) partially dented the overall earnings growth of the bourse.
Out of the nine sectors, Banks was the major gainer as a sector with 32.0%YoY rise in earnings, followed by Consumer Staples (12.1%YoY), Industrials (4.7%YoY), Services (4.3%YoY) and Transportation (2.3%YoY). Investment & Financial Services (-45.2%YoY) was the major loser, followed by Insurance (-25.8%YoY), Real Estate & Construction (-9.9%YoY) and Telecommunication (-4.7%YoY).
The growth in the earnings of the Banking sector was driven by Emirates NBD (40.5%YoY), Dubai Islamic Bank (34.5%YoY), and Emirates Islamic Bank (97.4 %YoY), which contributed 16.8%, 7.8%, and 3.9%, respectively, to the sector's incremental earnings. Emirates NBD reported strong bottom-line growth owing to an improvement in the top line due to a favorable shift in the asset mix (retail and Islamic business) and a rise in current account savings account (CASA) deposits. Furthermore, the bank's provisions declined, adding to the profitability. All banks reported earnings growth during 1H15, except Emirates Investment Bank, which reported 21.1%YoY fall in its earnings during the period, partially dented the overall earnings growth of the sector.
The growth of the Consumer Staples sector was majorly ascribed to 5.5%YoY growth in earnings of Dubai Refreshments Co., which contributed highest chunk of the sector's earnings. However, Dubai Parks & Resorts Co. recorded a loss of AED28.6mn in 1H15 which partially dented the sector's overall earnings growth.
The earnings of the Real Estate and Construction sector declined 9.9%YoY in 1H15, adversely affecting the bourse's earnings growth by 3.7%. Heavyweight Arabtec Holding was the biggest loser, contributing 22.7% to the accumulated fall in the sector's earnings. A slowdown in the Construction sector and lower oil prices led Arabtec to end in the red with a loss of AED998.2mn in 1H15 compared with a profit of AED240.3mn in 1H14. Union Properties Co. (-93.3%YoY) added 12.1% to the accumulated fall in the sector's earnings.
The Investment & Financial Services sector's earnings loss (-45.2%YoY) was driven by Dubai Financial Market Co. (-57.2%YoY) and Dubai Investment Co. (-37.2%YoY).
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