Corporate earnings post gain of 4.5% y/y

earnings in the GCC region continued to rise in 2012, albeit at a slower pace when compared to 2011. Overall corporate earnings grew 4.5 percent YoY to $55.4bn in 2012, after posting a strong growth in 2011. Saudi Arabia remained the biggest contributor to overall GCC earnings, constituting 46.0 percent in 2012, followed by UAE and Qatar contributing 21.2 percent and 18.7 percent, respectively.

UAE continued its strong performance from 2011, rising 28.8 percent YoY in 2012. UAE’s real estate sector recovered in 2012, which boosted the earnings during the year. Meanwhile, the Banking sector continued to grow despite tighter regulatory environment. On the other hand, Saudi Arabia’s earnings growth remained flat in 2012 after recording a robust growth in 2011, despite the government driven large expenditure witnessed during the year.

The Petrochemical sector, which fell 16.8 percent YoY, weighed heavily on the overall market. Companies in the sector were impacted by price volatility in petrochemical products along with weak demand. But a strong performance of the Banks & Financial Services sector, which rose 11.9 percent YoY, restricted the decline in overall earnings. Kuwait witnessed a 12.0 percent YoY growth in earnings, supported by the Banking sector. Oman’s earnings rose by 14.3 percent YoY as a result of buoyant performance across major sectors.

Bahrain and Qatar were the only countries to witness a decline in earnings in 2012. Bahrain was the worst performer in the GCC region, declining 34.6 percent YoY in 2012 owing to deterioration across majority of sectors. On the other hand, Qatar saw a marginal decline of 0.3 percent YoYled by decline in Real Estate sector earnings.

Bahrain

BSE’s consolidated earnings declined 34.6 percent YoY in 2012, with Industrial and Services sector (representing 29.8 percent of sector’s 2012 earnings) declining 53.9 percent YoY and 15.2 percent YoY, respectively. The Commercial Banks sector, which accounts for 61.4 percent of BSE’s earnings, rose 7.7 percent YoY in 2012. The sector’s heavyweight Ahli United Bank (AUB) gained 8.1 percent YoY.

AUB’s earnings growth was led by a 6.0 percent YoY increase in operating income. The company’s focus on deploying liquidity in diversified sectors led to an improvement in net interest margins.

Earnings from Industrial sector the next largest contributor to BSE’s 2012 earnings (15.1 percent) declined 53.9 percent YoY to $258.1mn. This was on account of a 54.4 percent YoY decline in earnings of major player Aluminium Bahrain. The decrease in company’s earnings was led by a 15.8 percent YoY drop in revenues and an increase in production costs from 75.0 percent (as a percent of sales) in 2011 to 85.9 percent in 2012.

Services sector representing 14.7 percent of BSE’s earnings declined 15.2 percent YoY. The drop in earnings was led by weak performance of Bahrain Telecommunications Company (Batelco), which is a primary contributor (63.1 percent) to the sector’s earnings. Batelco’s earnings declined 24.6 percent YoY adversely affected by one-off expenses related to extensive restructuring as well as by fierce competition in the region. Insurance sector reported profits for 2012 vis-à-vis losses in 2011.

Kuwait

The Kuwaiti market witnessed a steady growth in its corporate earnings in 2012, maintaining the momentum gathered since 2010. Overall earnings grew 12.0 percent YoY in 2012. Earnings of heavyweight Banking sector grew 1.2 percent YoY with all companies reporting growth in earnings barring Al Ahli Bank of Kuwait which reported a decline in earnings at 40.4 percent YoY. Heavyweights National Bank of Kuwait, Kuwait Finance House and Burgan Bank registered a growth of 0.9 percent YoY, 9.1 percent YoY and 10.0 percent YoY, respectively.

Telecommunications sector constituting 25.3 percent of KSE’s earnings declined 50.3 percent YoY to $1.1bn from $2.3bn in 2011. Earnings growth of Mobile Telecommunications Co. which represents 78.3 percent of sector’s earnings declined 11.5 percent YoY owing to impact of exchange rate fluctuations. National Mobile Telecommunications Co. registered a 79.2 percent YoY de-growth in earnings. In the Real Estate, Financial Services and Basic materials sectors, many companies are yet to report their full year financial results. As a result, the sectors are currently showing a decline in corporate earnings.

Oman

Corporate earnings in Oman increased 14.3 percent YoYto $1.7bn in 2012, led by robust growth across all sectors barring Industrial. Financial sector, which contributed to 48.8 percent of the MSM’s 2012 earnings, witnessed a strong 26.4 percent YoY growth in earnings in 2012. Heavyweight Bank Muscat, representing 44.5 percent of the sectors’ earnings, posted a net income of $361.7mn in 2012, up

This was due to increase in installment debtor’s portfolio by 3.8 percent, improvement in the performance of the company’s investments, and positively affected by the reversal of provisions.

The results were released recently according to CFC’s Annual Report that was issued and distributed during the General Assembly, additionally the Shareholders’ equity reached KD 169.5 million, an increase of 3.4 percent from the previous year.

Based on the released profits of the year 2012, the Board of Directors proposed a distribution of 24 percent (24 fils per share) cash dividend and the General Assembly has consented this recommendation.

During the General Assembly Meeting, CFC Chairman and Managing Director Abdullah Saud Al-Humaidhi said: “CFC’s share of the consumer loans market in Kuwait is around 20 percent and the company’s share in the financing company market is more than 75 percent, which proves the strong performance and the success of the business model that we 18.4 percent YoYsupported by a growth in operating income.

Services and Insurance sector, the next largest contributor to MSM’s earnings (39.6 percent), grew 7.6 percent YoY. While heavyweight Oman Telecommunications (Omantel) witnessed a 4.1 percent YoY growth in net profit, Omani Qatari Telecommunications (Nawras) witnessed a 22.1 percent YoY fall in 2012 earnings. Nawras was impacted by increased operating expenses during the year, while Omantel successfully increased its penetration despite fierce competition in the market. Smaller players like Al Jazeira Services, Al Batinah Hotels Co and Oman United Insurance Co almost doubled their profits. are adopting.

The company’s financial performance during 2012 is a clear indication of the growing consumer’s confidence, since its establishment keeping its leading position in the finance sector at the local level.

CFC is characterized by a strong performance and its diverse services in addition to marketing campaigns that contributes to meet customer confidence and satisfaction throughout the previous years. “

He also added: “Despite the fluctuations in the economic and political situation in the area, weak performance of Kuwait stock exchange and reduction of

The earnings of Industrial sector on the other hand declined 4.2 percent YoY led by decline in earnings for National Aluminium Products Co and National Gas Co. Increase in government expenditure led to an improved performance of cement majors. Earnings of Oman Cement (representing 23.5 percent of Industrial Sector earnings) and Raysut Cement (32.9 percent of sector’s 2012 earnings) grew 36.8 percent YoYand 64.1 percent YoY, respectively. The growth was largely driven by robust growth in volumes.

Qatar

QE’s corporate earnings fell 0.3 percent YoY in 2012. Consumer goods and Real discount rate to its lowest level, CFC was able to continue in its target towards development and growth, where CFC have launched “Tayhna Wahda” campaign during 2012. This campaign has achieved great success reflected positively on the company’s profits, especially during the last quarter of the same year.”

Concluding Al-Humaidhi said: “On this occasion I would like to extend my sincere gratitude to all of the company’s employees for their efforts, efficiency, and cooperation to achieve CFC goals and contribute to the progress of the company towards another successful year.”

Commercial Facilities Company (CFC) was established in 1977 as the first Estate sector were the only losing sectors during the year, declining 9.7 percent YoY and 56.0 percent YoY, respectively. This offset the gains posted by heavyweights Banks & Financial Services and Industrial sector which grew 6.6 percent YoY and 10.1 percent YoY, respectively.

The Banks & Financial Services sector continued its strong performance, growing 6.6 percent YoY in 2012. Loan books of banks surged with increasing demand from public sector companies as well as from real estate and construction companies in the private sector. Growth in the sector was led by heavyweights Qatar National Bank (up 10.5 percent YoY) and Commercial Bank of Qatar (up 6.7 percent Kuwaiti closed shareholding company with an initial capital of KD 3.8 million ($12.7million). It specializes in providing installment credit facilities to finance consumer and commercial products. CFC plays a major role in the development of the financial and consumer goods industry. It is one of the leading companies in offering installment credit facilities, car financing, and personal cash loans. Branching out in strategic locations, CFC has over 200 employees across its five branches and 21 representative offices. CFC’s online service, http://www.cfckw.com, provides customers with a convenient portal to manage their accounts. YoY). However, the sector’s growth was restricted by Qatar Islamic Bank (down 9.2 percent YoY) and National Leasing Holding Co. (down 11.8 percent YoY).

Industrial sector, representing 32.1 percent of the QE’s earnings rose 10.1 percent YoY to $3.3bn supported by government spending. Industries Qatar Co and Qatar Electricity & Water Co constituting 81.5 percent of the sector’s earnings grew 6.4 percent YoY and 10.5 percent YoY, respectively.

The performance of the Real Estate sector was dragged by de-growth in earnings of the industry leaders Barwa Real Estate Co. (down 6.6 percent YoY) and United Development Co (down 80.5 percent YoY).