The listed companies under the benchmark of the KSE-100 Index have achieved double-digit growth of 19 percent year-on-year (YoY) in profits during the 2QFY22, said a report by Spectrum Securities based on the analysis of 89 companies which represents the market capitalization of 95 percent.
This growth in profitability is attributable to exuberant economic activities generated additional demand, loosening Covid-19 restrictions, and the massive surge in commodities prices.
During the period under review, of 61 companies that had a positive earnings growth, 28 percent of companies posted negative growth while the remaining 11 companies financial results are not available.
On the sectoral front, the banking sector contributed the most to the overall profitability of the KSE-100 index as its weight stand at 26 percent in the same, followed by the Oil and Gas Exploration and OMCs sectors with the contribution of 24.4 percent and 10.2 percent respectively.
As per the analysis, the banking sector registered a growth of 39 percent YoY in profitability during Oct-Dec ’22, as strong advances and investment growth fuelled by solid deposit growth derived the growth, supported by government low-interest-rate schemes and increased fiscal borrowing. The strong inflows of remittances and the government’s construction and agriculture packages also supported the banking sector’s profitability.
Moreover, higher commodities prices and resumption of global economies generated financing needs which improved return on advances.
E&P sector’s profitability improved significantly due to higher Arab light oil prices to $79/bbl (+82 percent YoY) and rupee depreciation of 8 percent YoY against dollar. The profit after taxation of the sector increased by 53 percent YoY to Rs63.1bn in 2QFY22 as compared to Rs41.1bn in 2QFY21, the report said. However, the circular debt and subdued oil and gas production remained the major challenges for the sector, it added.
The fertilizer sector on the other hand, posted a decline of 27 percent YoY in profitability, primarily affected by FFBL’s higher credit loss on loan payment of markup from Fauji Meat (FML) & Fauji Food (FFL) and decline in fertilizer offtakes. The major contributors in sector profitability were EFERT (36 percent), ENGRO (28 percent), and FFC (35 percent), the report underlined.