Muscat: The total earnings of GCC-listed companies declined by 10.1 per cent year-on-year (y-o-y) to $16.8 billion in the third quarter of 2019 compared to $18.7 billion in the third quarter of 2018, according to a new report.
Four of the six Gulf Cooperation Council (GCC) markets recorded a year-on-year (y-o-y) decline in third quarter of 2019 earnings, with Saudi Arabia seeing the biggest fall of 25.4 per cent, according to KAMCO's research report titled 'GCC corporate earnings report – Q3, 2019.' KAMCO is a Kuwait-based company, which is engaged in the provision of investment and financial services.
On the other hand, Dubai and Kuwait reported higher earnings during the quarter with Dubai-listed stocks reporting a healthy growth as compared to the third quarter of 2018. In terms of the first nine months of 2019 earnings, the growth numbers were comparable to the third quarter 2019 with Saudi Arabia reporting a y-o-y decline of almost a quarter whereas Dubai reported the strongest growth.
In terms of sectors at the GCC level, two of the top 10 largest sectors by market capitalisation namely the Materials Sector and the Utilities Sector recorded steep double-digit declines in their 2019 third-quarter net profits resulting in an overall decline in aggregate quarterly profits for the GCC during 2019 third quarter. On the other hand, the banking and telecom sectors’ 11 per cent and 3.4 per cent growth in profits during the 2019 third quarter, respectively, partially offset the overall decline at the GCC level.
The Banking sector represented 61 per cent of the GCC earnings in 2019 third quarter, increasing marginally both as compared to 2018 third quarter as well as sequentially.
Earnings for the sector improved 11 per cent y-o-y to reach US$10.2 billion up from $9.2 billion in 2018 third quarter led by higher y-o-y profits in all GCC banks, barring Omani banks. In terms of sequential growth, profits increased by 8.3 per cent. The Saudi banking sector registered a profit growth of 3.7 per cent y-o-y to reach $3.4 billion in 2019 third quarter.
Dubai’s banking sector represented 19.7 per cent of the total GCC banking earnings. DFM-listed banks posted 51.0 per cent rise in 2019 third-quarter earnings that reached $2.0 billion from $1.3 billion in 2018 third quarter. The steep increase came primarily on the back of higher profits reported by ENBD. The top three banks in the GCC in terms of 2019 third-quarter net profit were ENBD ($1.4 billion), QNB ($1.05 billion) and First Abu Dhabi Bank ($0.85 billion) in profits during the quarter. Profits for the top 10 banks in the GCC stood at US$6.5 billion or 64 per cent of the total GCC banking sector profits. reported the biggest increase in y-o-y net profits in the GCC recording a 10.6 per cent rise to reach $774.5 million from $700 million during the 2018 third quarter.
Telecommunication companies in Kuwait also witnessed profit growth during 2019 third quarter by 7.9 per cent to reach US$241.7 million primarily on the back of higher profits for Zain and Ooredoo Kuwait. On the other hand, telcos in Bahrain and Dubai reported double-digit declines of 38.1 per cent and 13.5 per cent, respectively.
The GCC real estate sector, the fourth largest sector by market-cap, witnessed a 6.4 per cent y-o-y decline in 2019 third-quarter net profits that reached $1.04 billion down from $1.1 billion in 2018 third quarter. Two of the top three largest loss-making companies in the sector were Saudi Arabian lead by Emaar Economic city which posted a loss of $53.8 million, followed by Dubai’s Union Properties with a loss of $22.2 million and Saudi Arabia’s Jabal Omar Development with a loss of $21.5 million for 2019 third quarter. Dubai continued to be the largest real estate market in the region with the sector contributing more than 60 per cent of the aggregate sector profits.
GCC materials sector, the second-largest sector in the region by market cap, witnessed 70.7 per cent y-o-y decline in 2019 third-quarter net profits that reached $0.82 billion down from $2.72 billion in 2018 third quarter. Saudi Arabian companies dominated the sector in terms of total earnings despite reporting a steep drop in 2019 third quarter against 2018 third quarter.
The decline in profits for the sector was the primary reason that led to the decline in earnings for the aggregate GCC earnings for the second consecutive quarter. In Saudi Arabia, Sabic reported the biggest decline in earnings during the quarter. The company’s profits fell 86.3 per cent in 2019 third quarter to reach US$222.4 million as compared to US$1.6 billion during 2018 third quarter. The biggest three loss-making companies in the GCC materials sector were also in Saudi Arabia including Saudi Arabian Mining Co, Saudi Arabia’s largest miner, that posted a loss of US$24.5 million in 2019 third quarter against a profit of US$110.6 million in 2018 third quarter. Kuwait and Abu Dhabi were the only markets were Materials sector reported a growth in profits while the rest of the GCC countries reported a decline.