Oman’s corporate sector posts OMR142m profit in the first quarter

Business Monday 15/May/2017 17:28 PM
By: Times News Service
Oman’s corporate sector posts OMR142m profit in the first quarter

Muscat: Oman’s listed companies have reported a drop in profit at OMR142 million for the first quarter of 2017, down from OMR218 million in the same period of last year.
According to market sources, a subdued business environment in major sectors in Oman coupled, along with cost escalation, has resulted in lower net earnings of listed firms.
“A declining business trend due to low oil prices and slowing down of government spending have resulted in the fall in profit. This was accelerated by an increase in tax rates, utility charges and government fees,” said Joice Mathew, head of research at United Securities.
The Sultanate has 117 companies listed on the Muscat Securities Market (MSM).
There was a fall in the combined net profit of MSM 30 Index companies as well, which dropped to OMR121.4 million for the first quarter of 2017 from OMR170.3 million for the same period of last year.
Suresh Kumar, head of research at Al Maha Financial Services, said there was an increase in royalty paid by telecommunication service providers from 7 per cent to 12 per cent. “The increase in transportation costs and natural gas prices has affected the industrial sector.”
However, the overall profit of the banking sector was marginally higher. Listed conventional banks achieved a 1.8 per cent growth in total net profit to OMR87.43 million for the first quarter of 2017, against OMR85.89 million for the same period of last year. Credit growth of Omani banks was 5.5 per cent in the first quarter on a year-on-year basis.
Net profits for industrial sector companies, especially cement producers, were lower. The combined net earnings of two Omani cement producers declined by 50 per cent to OMR5.3 million for the first quarter of 2017, compared with the same period of last year, noted Mathew.
Net earnings at utility firms, especially power producers, also slipped.
“We do not expect any big negative surprises for the full year, although we are expecting a lower profit compared to 2016,” noted Al Maha Financial Services’ Kumar.
“Companies will be forced to conduct business at a lower margin,” added United Securities’ Mathew.
“Dividend might be (set) on the basis of the trend in earnings. Banks may not be willing to share more dividend, rather retain profit within banks to preserve capital. Also, payout ratios might come down in the case of all companies,” elaborated Mathew.
However, the dividend yield of the Muscat bourse could be better because of a drop in share prices, noted Kumar.