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UAE Corporate Earnings Surge 104% in 2011: Markaz

Middle East : 18 March 2012

Source: Emirates 24|7

Overall, GCC corporate earnings grew 26% last year, led by UAE and Saudi companies

Even though the stock market indices didn’t reflect that, the UAE’s listed corporates had a remarkable year in 2011, with corporate earnings registering three-digit growth in the year compared to the previous year.

According to Kuwait Financial Centre (Markaz), UAE corporate earnings in 2011 surged a massive 104 per cent over 2010. This is after a massive slump of 51 per cent in earnings that the country’s corporates reported in 2010 over 2009.

“UAE reported a twofold increase in profits led by recovery in real estate and improvement in bank earnings,” said M.R. Raghu, Senior Vice-President – Research, Markaz.

“Real estate improvement was led by Aldar Properties which swung from a $3.4bn loss in 2010 to $175mn profits in 2011 due to revenue from sale of assets to the government,” he added.

Buoyed by the UAE’s corporate earnings coupled with earnings of Bahraini corporates (64 per cent gain in 2011 over previous year), the GCC corporates registered healthy overall gains of 26 per cent for the year.

“During 2011, GCC corporates posted a healthy set of numbers with overall earnings growth of 26 per cent when compared to 2010. Total earnings came in at $52.3bn; this is versus our expectation of $54.26bn or a 29 per cent annual growth,” said Raghu.

“GCC aggregate earnings growth of 26 per cent is driven primarily by incremental earnings from Saudi Arabia and the UAE,” the Markaz report noted. “Saudi Arabian companies posted total profits of $24.9bn – an increase of 19 per cent over 2010. The increase was mainly due to higher earnings reported by commodity companies which delivered $2.9bn in incremental earnings. SABIC’s FY11 net income was up 36 per cent to $7.8bn.”

Oman was the only GCC country to report a decline (21 per cent) in 2011 earnings compared with 2010. “FY2011 earnings were driven by strong performance from commodity companies and banks,” added Raghu.

According to Markaz, aggregate net profits from the commodity sector were $13.3bn, an increase of $3.8bn over 2010, due to increased petrochemical prices and higher volumes. Bank earnings rose 17 per cent in 2011 to $20bn fuelled by higher government spending and lower provisions.

Telecom, on the other hand, continued to drag overall earnings with a bottom-line drop of 23 per cent. Declining growth in mobile revenues and foreign exchange losses were the prime reasons for this fall. Construction-related companies too continued to trail, with earnings declining 27 per cent, from $2.3bn in 2010 to $1.7bn in 2011.

However, real estate sector continued its recovery with aggregate net income coming in at $2.4bn, compared with a net loss of $3.6bn in 2010.

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