Rs 243 billion earned by Pakistani companies listed at Stock Exchange in just three months

 Profit of 94 top companies increased 82% from January to March 2021

According to the report of Topline Securities, the net profit earned by the top 94 Pakistani companies - mostly belonging to industrial and services sectors - surged 82% to a record high of Rs 243 billion in the January-March 2021 quarter .

Same companies earned the net profit of RS 220 billion in the October-December 2020 quarter. The topline Securities report clearly shows that corporate sector in Pakistan is earning record profits but there is hardly any increase in wages of workers. The corporate sector is not sharing profits with workers. The lower wages and other government incentives contributed in the increase of record level profits of big companies. 

The profits of big business are rising but wages of workers have been stagnant. After a slump of few months, the profits returned to normal level but wages of workers have not returned to the pre-pandemic levels so far.  

The incentives given to corporate sector during pandemic also helped the big business to increase their profits. Many big firms and industries took full advantage of government incentives including cheap loans to pay salaries to workers during lockdown. 

The federal government announced Rs 1200 billion package during the pandemic to help the businesses and people. Nearly Rs 200 billion were spent on ordinary Pakistanis and rest of the amount were given to the big business. 

Despite receiving so many concessions from the government, industrialists and businessmen continued rendering tens of thousands workers unemployed, terminating them on the pretext of the coronavirus and the subsequent business losses. The government did not come up with any mechanism to prevent the termination of workers.  

Topline Securities Deputy Head of Research Shankar Talreja said that “the largest contributors to KSE-100 profitability were oil marketing companies (OMCs) followed by fertiliser, cement, banks and chemical sector companies.”

 These companies are listed at the Pakistan Stock Exchange (PSX) and are part of the benchmark KSE-100 index, which is a group of top 100 performing companies. These companies had earned a net profit of Rs 133.65 billion in the same quarter last year when the first wave shot down economic activities in the country.

The clubbed profit of the 94 companies in the quarter ended March 31 increased by 11% compared to Rs 220 billion earned in the previous quarter ended December 31, 2020. On a quarter-on-quarter basis, top contributors were banks, oil marketing companies, oil and gas exploration and production companies, cement, and textiles.

“The government (owned) companies’ profit increased by 15% year-on-year and 33% quarter-on-quarter, while earnings of privately managed companies’ improved 119% on a yearly basis and 5% on a quarterly basis,” Talreja added.

Private companies outperformed government companies on a yearly basis during the outgoing quarter as last year in March 2020 oil marketing companies, refineries and cement companies recorded losses, he said.

The government companies outperformed private companies on a quarterly basis due to exceptional profits posted by the Bank of Punjab (BOP), Oil and Gas Development Company (OGDC), Pakistan State Oil (PSO), and National Bank of Pakistan (NBP), he said. “Our 1Q2021 analysis is based on the data of 94 companies, which represents 98% of KSE-100 market capitalisation.”

                                        

Last year, in the quarter ended March 31, due to Covid-19 fuelled lockdowns across the world, the energy sector was severely impacted as oil prices touched new lows amidst sinking demand, which resulted in heavy inventory losses to OMCs in Pakistan.

That said, due to the low base effect, OMCs emerged as star performers in first quarter of 2021, contributing an additional Rs21 billion in profits. On a quarterly basis, oil marketing companies posted a 94% increase in profits due to FX and inventory gains.

The fertiliser sector contributed additional profits worth Rs 17 billion year-on-years in first quarter of 2021 mainly led by Engro Fertilizer and Engro Corporation.

Sales of cars, cement, furnace oil, petrol and diesel, tractors, motorbikes, trucks and buses surged in a range of 22% to over 200% in the single month of March compared to the same month of last year, the report added.

Besides, power production increased 30%, banks deposits increased 18% and receipt of workers’ remittances from overseas Pakistanis soared 43% in the month compared to the same month of last year.

The growth in sales and profit had suggested a surge in the confidence level of consumers and businesses following a significant drop in infection cases and availability of bank financing at a cheaper cost in the wake of a massive 625 basis points cut in the benchmark interest rate during the period of March-June 2020 to 7%.

The growth in sales and profit by car manufacturers became possible largely due to the offer of cheaper car financing by banks because of excessive liquidity backed by a historic surge in deposits by account holders.

The notable growth in bank deposits was partly driven by significant growth in workers’ remittances inflows, it added.

                                                  Khalid Bhatti