Pakistan Stock Exchange’s (PSX) top-performing listed companies have posted a cumulative growth of 22% in net profit that reached Rs1 trillion despite economic slowdown and imposition of super tax in fiscal year ended June 30, 2022.
The net earnings, however, marked a significant slowdown as they had increased 55% in the prior fiscal year. “The slowdown in growth is primarily due to the impact of super tax,” reported Topline Research analyst Sunny Kumar on Saturday.
In US dollar terms, the after-tax profit rose 10% year-on-year to $5.6 billion while the pre-tax profit swelled 28% to $9.9 billion in FY22.
In the FY23 budget, the government imposed a 10% super tax on 15 specified sectors with earnings of more than Rs300 million in tax year 2022 (FY22) with retrospective effect.
Furthermore, a slab-wise super tax of 1-4% was imposed on sectors excluding the specified areas with earnings of Rs150-300 million or above.
The increase in profits in FY22 has been led by oil marketing companies (OMCs), whose earnings rose 192% year-on-year, oil and gas exploration (E&P) firms, up 30%, and refineries, up 639%.
“Though profits are rising, concern remains over the quality of these earnings as a significant percentage is not cash earnings due to circular debt and piling up of receivables for companies in the energy chain,” said Topline’s Kumar.
Other sectors like textile, banks and chemicals also gave major support during FY22, with profit growth of 74%, 3% and 17% year-on-year respectively.
On the flip side, fertiliser and power sectors reported a decline in profits during FY22, with earnings dropping 9% year-on-year each.
In spite of the high profits, dividend payout was lower by 3% year-on-year to Rs392 billion in FY22. “This is probably due to the circular debt that is affecting the cash flow of companies,” Kumar said.
“E&P firms’ dividend remains flat despite 30% earnings growth. Similarly, banks’ dividend was down 12% year-on-year.”
For its analysis, the brokerage house took 81 companies out of the total of 100 firms (that have announced their results), which represent 93% of the KSE-100 index market capitalisation.
“We believe that adding remaining companies will not materially impact the profitability growth trend,” he elaborated.
OMCs emerged as the best sector. Its profit increased to Rs115 billion in FY22 as compared to Rs39 billion in FY21, primarily due to inventory gains.
Pakistan State Oil (PSO) is the market leader in the OMCs sector, reporting earnings of Rs86 billion versus Rs29 billion last year. It was followed by Attock Petroleum which reported earnings of Rs18.5 billion against Rs4.9 billion last year.
“The significant jump in earnings is primarily due to inventory gains followed by higher volumetric sales,” said Kumar.
E&P emerged as the second best sector where profit increased to Rs246 billion, up 30%. Oil and Gas Development Company (OGDC) contributed a major portion (54%) to the sector’s profit growth, followed by Pakistan Petroleum (22%), Mari Petroleum (13%) and Pakistan Oilfields (11%).
“Sector profit increased on account of increase in net sales by 38% year-on-year, amidst increase in international oil prices and rupee devaluation against the US dollar.”
Published in The Express Tribune, September 25th, 2022.
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