Corporate earnings in GCC fall by 8%

Muscat: Persisting lower oil prices, liquidity squeeze and sedate global growth led to decline in Gulf Cooperation Council (GCC) corporate earnings in the first half period of 2016, compared to the corresponding period a year ago.
During the first half of 2016, corporate earnings in the GCC fell by 8 per cent over the same period in 2015. With the exception of Oman, which registered a growth of 7 per cent, all other countries recorded negative growth, according to Kuwait Financial Centre ‘Markaz’.
Total earnings in the first half of 2106 came in at $32.8 billion, partly supported by telecom and financial services sector. Among sectors, telecommunications and financial services posted positive earnings growth, as contribution from international markets and favourable exchange movements supported their bottom line. Earnings in banking sector remained flat while earnings in commodities, real estate and construction related sectors contracted as the fall in oil prices is increasingly felt across non-oil sectors.
Blue chips fared relatively better, while earnings of mid-cap and small-cap companies took a beating in the first half of 2016, falling by 38 per cent and 22 per cent, respectively. Earnings for large cap stocks (market cap) $3 billion; 60 companies, 73 per cent of all GCC market cap) declined by 5 per cent in the first half of 2016. For the full year of 2016, earnings are estimated to fall by 4 per cent, the Markaz research note said.
Saudi Arabia witnessed a decline of 7 per cent in net earnings in the first half o f2016, compared to the same period a year back. Earnings declined for all sectors except financial services. The highest decline in earnings were witnessed in the real estate (-50 per cent) and conglomerate (-36 per cent)sectors.
“We estimate full year earnings to fall by 6% in 2016, due to further fall in earnings in the commodities, banking and construction-related sectors, as growth is expected to be affected by depressed oil prices,” Markaz said.
Kuwait witnessed a decline of 6 per cent in net earnings in the first half of 2016, with commodities, real estate and financial services declining by 11 per cent, 23 per cent and 53 per cent respectively. Banking and telecom sectors were the only exceptions in Kuwait as their earnings bucked the declining trend. For 2016 full year, Kuwaiti corporate earnings are expected to fall by 2 per cent, due to moderate growth in banking and telecom sector.
Earnings for UAE companies witnessed a decrease of 8 per cent in the first half of 2016 (year-on-year basis) owing to low oil prices, sluggish economy and poor performance of real estate companies. Real Estate sector as a whole declined by 4 per cent in the first half of 2016 as real estate prices in the UAE were down owing to poor business sentiments and stagnant sales.
“We expect UAE corporate earnings to fall by 3 per cent, as subdued credit growth is expected to take a toll on banking sector earnings in the second half of 2016 and on expectations of further earnings contraction in real estate sector,” the report said.
Qatar earnings fell by 11 per cent in the first half of 2016. Qatar’s net earnings growth was affected by the fall in real estate sector earnings which fell by close to 50 per cent. Telecommunications and banking sectors witnessed an increase in earnings during in the first half of 2016 at 35 per cent and 3 per cent, respectively. “We expect full earnings to be flat for Qatar in 2016 due to continued thrust on infrastructure developments and relatively better credit growth expectations than its GCC peers,” the report said.