UAE corporate earnings go through the roof by $8 billion in H1
Corporate earnings in the UAE jumped 16 percent to $8 billion in the first half of 2014 at a pace surpassing the average growth rate for the GCC region, underscoring the strong rebound in business activity, Markaz said on Tuesday.
Across the GCC, total earnings during the first half-year of 2014 surged 11 percent to $33 billion over the same period last year.
“GCC corporate earnings were driven by strong performance from banks and financial services, telecom, conglomerates and real estate sectors,” Markaz analysts pointed out. “Overall, we expect the UAE earnings growth, the second-fastest in the region after Saudi Arabia, to be robust at 15.5 percent for the full year of 2014 as against 2013. In the first half of 2013, UAE recorded corporate earnings of $6.89 billion.”
“Corporate earnings in Saudi Arabia are expected to grow by 10.8 percent, while Kuwait, Qatar and Oman are expected to grow by 5.9 percent, 6.1 percent and 6.2 percent, respectively, during the same period. Bahrain earnings are expected to grow moderately by 1.9 percent,” Osama Al Musallam, senior communications officer at Markaz, said.
Based on the current trends, Markaz analysts expect an annual earnings growth of 10 percent for the GCC in 2014.
“We believe that local developments in the GCC region play a vital role in the regional stock markets. Implementation of structural reforms in Saudi Arabia, major changes in corporate law offering a conducive environment to conduct business in Kuwait and execution of infrastructural projects in anticipation of hosting Dubai Expo 2020 and the 2022 Fifa World Cup in the UAE and Qatar, respectively, are expected to support earnings growth,” they said.
Aggregate net profits from financial services in the first half-year of 2014 was $1.2 billion, a growth of 35 per cent over the same period last year. Earnings from conglomerates came in at $1 billion recording a growth of 29 percent when compared with the same 2013 period, they said.
Real estate earnings in the region rose eight percent to $1.8 billion compared to the same 2013 period. Banking sector had the highest earnings among the sectors recording $13.3 billion and hence had the highest impact on the overall earnings recording a growth of six percent over the same period in 2013.
When compared with the preceding half-year — the first half of 2014 versus the second half of 2013 — GCC corporate earnings rose by 12 percent. On a year-on-year basis, Saudi Arabia was the biggest gainer with 20 percent in 2014 first half while Bahrain declined the most at 23 percent.
Financial services gained the most during first half, a total earnings growth of 35 percent on a year on year basis, which was followed by conglomerates, telecom and real estate, which grew by 29 percent, 25 percent and eight percent, respectively. Financial services have been helped by the improving economic prospects and tremendous increase in value of asset classes such as equity and real estate.
Earnings in construction related and commodities segment contracted by one percent and four percent, respectively, on a year-on-year basis during the first half.
“Commodities segment in the GCC are highly correlated with global growth and as a result sluggish demand in global markets affected the earnings. The industry bellwether for the region, Sabic [Saudi Basic Industries Corp], has been affected by it and as a result has shown a very flat earnings growth of two per cent,” Markaz said.