GCC firms continue to recover

Corporate earnings up 16% in Q3 and 24% in first nine months

An economic recovery driven by a surge in crude prices in Gulf oil producers boosted the income of many listed companies in the first nine months of 2010 as they continued their march towards a full post-crisis recovery.

According to a Kuwaiti financial institution, the combined profits of nearly 44 per cent of the listed firms, accounting for 80 per cent of their capitalization, swelled by about 16 per cent year-on-year in the third quarter and around three per cent compared with the second quarter of this year.

The earnings also soared by nearly 24 per cent in the first nine months of 2010 compared with the same period of last year, Markaz Financial Centre said in a study on corporate earnings in the six-nation Gulf Cooperation Council (GCC).

The figures showed the net income of those companies swelled to around $8.7 billion in the third quarter and to nearly $25.4 billion in the first nine months.

“Growth was driven mainly by a surge in the region’s commodities and banking segments’ earnings. The commodities segment’s impressive performance aided the nine-month growth as well.…consequently, the GCC’s overall earnings for the first nine months soared by 24 per cent,” it said.

It showed there was an increase of 18 per cent in the income of Saudi Arabia’s companies to nearly $5.4 billion in the third quarter.

It said factors such as the recovery in commodity prices, stable demand in major export markets, and weakening dollar supported strong growth in the commodities sector. The banking sector, on the other hand, dampened the Kingdom’s earnings prospects as they dipped by 27 per cent in the third quarter of this year and 15 per cent in the first nine months.

“High loan loss provisions and slow loan book growth dented the sector’s earnings growth, especially in the second quarter of 2010 because of their exposure to the Sa’ad and Algosaibi groups,” the report said.

Kuwait recorded one of the highest growth rates in earnings though on the back of poor visibility. Quarterly earnings leaped by 57 per cent to $637 million.

UAE’s corporate earnings grew by just one per cent YoY in the third quarter, showing “anemic” performance, the report said.

“While banks generally posted good results, telecom disappointed…. UAE banks posted mixed results due to repercussions of the Dubai World debt issue, which resulted in high loan defaults, increased provisioning and lower lending activity.”

As for Qatar, companies maintained good performance with their net profits jumping by around 27 per cent, led by banks and commodities.

Oman and Bahrain reported sequential declines in their third quarter performance, with their contribution to GCC earnings remaining minimal.

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