Major listed firms expect 4.2% growth in net profit

Muscat: Major Omani firms, which constitute the MSM30 Index, are expected to achieve a 4.2 per cent year-on-year growth at OMR125 million in net earnings in the fourth quarter of 2017, according to a report released by the Gulf Baader Capital Markets. This excludes investment holding companies.
Revenues of MSM 30 companies (excluding investment holding firms) in the fourth quarter are estimated to increase by 1.8 per cent to OMR697 million.
“We saw a weak corporate earnings trend during the last four quarters amid a low oil price environment, removal of fuel and electricity subsidies, and increases in operating costs. Added to the economic slowdown, the increase in the corporate tax rate to 15 per cent, introduction of withholding taxes, and higher royalty charges for telecom companies impacted the performance during 2017,” stated the report.
Increase marginally
The report also noted that the revenues of MSM30 Index companies (excluding investment holding firms) for 2017 are estimated to increase marginally by 0.2 per cent year-on-year to OMR2.799 billion, amid growth in financial and service sector companies.
“We do anticipate the overall demand slowdown in the local and regional economies to have an impact on the corporate performance during the period,” revealed the report.
The net earnings of MSM30 companies (excluding investment holding forms) for 2017 are projected at OMR516 million, showing a decline of 12.9 per cent on a year-on-year basis. Revenue of MSM Index companies (including investment holding firms) for 2017 is estimated to remain flat at OMR3.068 billion. Also, earnings of MSM 30 firms are anticipated to reach OMR540 million, indicating a decline of 14.3 per cent on a year-on-year basis.
The credit off-take lowered during 2017 amid lower government and private sector spending. The retail credit (personal and housing) continued to remain stable. “We expect credit growth to improve in the fourth quarter of 2017 due to the financial closure of certain big ticket quasi government projects,” the report noted. The performance of the banks was expected to remain mixed amid net interest margin pressure during the fourth quarter, and estimated decline in non-interest income.
However, the local banking system’s liquidity has shown a relative improvement, compared to 2016-end, with the government’s external borrowing programme and, also, due to lower credit demand. Banking sector earnings for the fourth quarter of 2017 are estimated to decline by 5.9 per cent year-on-year and 11.4 per cent on a quarter-on-quarter basis.
The industrial sector earnings are estimated to increase on a low base to OMR7.6 million. The services sector, too, is expected to report a growth in earnings on a year-on-year basis amid a low base. The impact of higher royalty charges of telecom companies and increases in operating costs are also expected.