Aggregate net profits reported companies listed on GCC exchanges dropped to the second lowest level in nine quarters during Q1-2024 at $56.4 billion as compared to $61.8 billion in Q1-2023, according to Kamco Invest. 

 

The decline was mainly led by a y-o-y decline in profits for the Energy, Telecom and Capital Goods sectors partially offset by higher profits reported by mainly by Banks, F&B and Real Estate companies. 

 

The sequential performance was positive with higher profits for the top three sectors partially offset by fall in profits for Real estate and F&B sectors resulting in a q-o-q profit growth of 2.6%. The Materials sector showed healthy improvement in profits during the quarter.

 

Energy sector

Net profits for the Energy sector witnessed the biggest y-o-y decline during Q1-2024 mainly led by fall in volumes sold by companies in the sector, partially offset by higher crude oil prices as compared to Q1-2023. Average brent crude prices was up by 2.2% during Q1-2024 at $82.9 per barrel as compared to the average for Q1-2023. 

 

Net profits reported by Aramco dropped by 11.9% y-o-y during the quarter, accounting for bulk of the decline in profits at the GCC level. Excluding Aramco’s results, the profit decline for GCC listed companies came in at –5.3%.

 

On the other hand, healthy profits for the GCC banking sector helped to partially offset the bulk of the decline in earnings. Aggregate earnings for the GCC banking sector surged 11.5% y-o-y or by $1.5 billion to reach $14.5 billion in Q1-2024. The q-o-q growth was albeit marginal at 0.6% vs. Q4-2023. The y-o-y growth reflected double digit growth in earnings for four out of seven markets while the remaining three also reported healthy growth. Earnings for the UAE banking sector improved by a healthy 15.2% to reach $5.5 billion while the Saudi banking sector recorded a y-o-y growth of 8.2% during Q1-2024. The growth in earnings came despite a marginal decline in net interest income as elevated interest income was offset by higher interest expenses. A fall in operating expenses and lower impairments supported earnings.

 

Profit for the GCC energy sector plummeted 17.7% y-o-y during Q1-2024 to reach $29.8 billion as compared to $36.2 billion during Q1-2023. The decline came after half of the companies in the sector reported a y-o-y decline in profits. In terms of q-o-q performance, net profits remained almost flat during the quarter with a marginal growth of 0.6%.

 

Biggest decline

The biggest y-o-y percentage decline in profits was recorded by Taqa at 81.8% or a decline of $2.6 billion reaching $576 million in the quarter.

 

The decline was led by one-off gains during the corresponding quarter last year and excluding these gains, the company’s net profit surged 7% as compared to Q1-2023. The company reported 5.3% growth in revenues that reached AED13.7 billion ($3.73 billion).

 

Excluding the results for Aramco and Taqa, profit for the sector saw a much smaller decline of 4.1% during Q1-2024.

 

Telecom sector

Net profits for the GCC telecom sector declined by 13.3% y-o-y to reach $2.4 billion in Q1-2024. The decline was led by a steep fall in profits for six out of fifteen telecom operators in the region. Zain KSA reported the biggest decline in profits that reached $17.7 million during Q1-2024 vs. $303.0 million during Q1-2023 due to one-off gain related to sale of telecom towers during the previous year’s quarter. This was also reflected in the financials for the Zain Group. 

 

Meanwhile, profits for Ooredoo Kuwait declined by almost 80% y-o-y during Q1-2024, also due to one-off gains related to legal claims during Q1-2023. In the case of Omantel, the profit decline of 39.2% y-o-y during Q1-2024 was led by higher service expenses during Q1-2024 as well as higher non-operating gains during Q1-2023. These aforementioned decline in profits were partially offset by higher profits reported by Etisalat, STC and Mobily during Q1-2024.

 

Real Estate

Net profits in the GCC Real Estate sector witnessed a marginal y-o-y growth of 3.6% during Q1-2024 to reach $1.9 billion.

 

The trend at the country level remained mixed with companies in Abu Dhabi and Kuwait witnessing healthy y-o-y growth of 50.5% and 23.4%, respectively, while Saudi and Bahraini companies in the sector reported declines. The growth in Abu Dhabi reflected higher profits reported by Aldar Properties led by higher revenues during the quarter.--TradeArabia News Service