Karachi, October 30, 2024 – A somber note has been struck on the corporate landscape as KSE-100 index companies witnessed a significant 14% year-on-year (YoY) decline in profitability during the first quarter of the fiscal year 2024-25 1QFY25.
According to a comprehensive analysis by Topline Securities Limited, these companies collectively earned Rs 403 billion in 1QFY25, a stark contrast to the Rs 468 billion garnered in the corresponding period of the previous year. While this represents a 16% quarter-on-quarter (QoQ) increase, the overall trend remains disconcerting.
A deep dive into the sector-wise performance reveals a mixed bag of fortunes. The energy and power sector, particularly exploration and production (E&P) companies, bore the brunt of the downturn, experiencing a 21% YoY decline in earnings. The food sector also faced headwinds, contracting by 15% YoY. The refinery sector’s woes were even more pronounced, transitioning from a profitable position in 1QFY24 to a loss-making one in 1QFY25.
While the banking sector managed to maintain its profitability at Rs 156 billion, a 39% share of the total KSE-100 index earnings, it failed to capitalize on the declining interest rate environment. On the other hand, the fertilizer sector bucked the trend, posting a 16% YoY increase in earnings, driven by higher urea and DAP prices, despite lower offtake volumes.
The cement sector also showcased resilience, with a 14% YoY surge in earnings, primarily attributed to higher retention prices, lower coal costs, and an efficient power mix. The pharmaceutical sector emerged as a standout performer, recording a staggering 5.6x YoY growth in profitability, propelled by improved margins and reduced finance costs.
However, the picture was less rosy for sectors like refineries, oil marketing companies (OMCs), textiles, and E&Ps, which experienced significant declines in earnings. The technology sector, notably burdened by the losses incurred by Pakistan Telecommunication Company (PTC), reported a loss of Rs 1.4 billion in 1QFY25.
The analysis, encompassing 95 companies representing 99% of the KSE-100 market capitalization, suggests that the inclusion of the remaining companies would not materially alter the overall profitability trend.
In terms of dividend distribution, KSE-100 companies announced a total of Rs 106 billion in cash dividends in 1QFY25, a modest 3% YoY increase. This translates to a 26% dividend payout ratio in 1QFY25, up from 22% in the previous year.
The banking sector remained the largest dividend contributor, followed by E&Ps and fertilizers. Within these sectors, United Bank Limited (UBL), Meezan Bank Limited (MEBL), MCB Bank Limited (MCB), Oil & Gas Development Company Limited (OGDC), Pakistan Petroleum Limited (PPL), Engro Fertilizers Limited (EFERT), and Engro Corporation Limited (ENGRO) were the key dividend-paying entities.
As the corporate landscape continues to evolve, these trends will undoubtedly shape the trajectory of the Pakistani stock market and its constituent companies.