The net profit of corporate sector companies declined by 62 percent to Rs 17.9 billion ($223mn) in the 4th quarter of 2008 as compared to Rs 47.7 billion ($782mn) earned in the corresponding quarter of 2007.
The Cement, E&P and Fertiliser sectors were the major drivers of corporate earnings during the fourth quarter of the year 2008.
A drastic fall in oil prices in the international market was the major reason, which affected negatively the earnings of oil marketing companies and refineries, Atif Zafar, an analyst at JS Global Capital said. "If PSO, Shell, ATRL, PRL and NRL are removed, as they suffered severely due to drastic fall in oil prices (more than $50 per barrel), then corporate earnings would have declined by only 34 percent, he added.
The Cement sector booked hefty profit growth of 181 percent on the back of high local and export retention prices. The E&P sector profits grew by 15 percent as a result of higher oil and gas well head prices along with 24 percent devaluation of Pakistan rupee in the period. Fauji Fertiliser Bin Qasim Limited (FFBL) boosted fertiliser sector profitability, as the sector recorded a growth of 9 percent amid higher DAP prices.
Amid sharp decline in oil prices, refinery and the OMC sectors incurred huge inventory losses. Moreover, they also faced exchange losses due to significant rupee depreciation plunging both sectors into losses. Banks profits declined by a hefty amount of Rs 11.82 billion ($147 m) as they recorded higher provisions amid increase in non-performing loans due to a combination of higher interest rates and economic slowdown. Moreover, they recognised impairment losses on account of diminishing stock prices. Auto sectors gross margins squeezed further as yen continued to strengthen against the Rupee, resulting 86 percent decline in profitability. The companies used in this analysis account for 75 percent of the total market capitalisation of KSE 100 Index.
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