Corporate profitability in 3QFY25

Staff Report:

Islamabad: KSE-100 index companies posted earnings of Rs409bn in 3QFY25, up 2% YoY from Rs401bn in 3QFY24. In US dollar terms, profitability stood at US$1.4bn, up 2% YoY in 3QFY25.

Excluding Banks, profitability declined by 5% YoY to Rs243bn in 3QFY25.

Despite fall in interest rates, banking sector’s earnings increased by 14% YoY to Rs166bn (41% of the total KSE-100 index profitability) in 3QFY25. This growth was primarily driven by an increase in both Net Interest Income (NII) and Non-Interest Income.

The profitability of E&Ps declined by 10% YoY to Rs91.6bn in 3QFY25 due to a decline in oil prices by 8.3% to US$74.96/barrel in 3QFY25 and a reduction in oil and gas production.SECP to setup a centralized corporate Ultimate Beneficial Ownership (UBO) Registry

During 9MFY25, benchmark Index companies posted earnings of Rs1.3trn, down 2% YoY. Excluding E&Ps, profits are up 6% YoY.

Cement sector’s earnings surged to Rs36bn up 28% YoY in 3QFY25 mainly due to increase in cement offtakes along with higher retention prices, lower finance cost and falling coal prices with efficient power mix.

Automobile sector also showed a strong recovery led passenger vehicle companies, with earnings rising by 35% YoY to Rs20.5bn. This recovery was driven by an increase in volumetric sales by 23% YoY amid declining interest rates, lower fuel prices and uptick in economic activity.

Food & personal care sector’s earnings rose by 15% YoY to Rs17bn in 3QFY25, primarily due to a decline in inflation and interest rates.

Pharmaceutical sector witnessed 97% YoY growth in profitability to Rs6.6bn in 3QFY25, compared to Rs3.3bn in 3QFY24, primarily due to an improvement in margins following the deregulation of non-essential products and a decline in finance costs. However, on quarterly basis, profitability declined by 10% due to decline in sale volumes amid seasonality impact.

On the contrary, Fertilizer sector recorded a decline of 27% and 43% YoY and QoQ in earnings to Rs28.5bn (7% of total KSE-100 index profitability) in 3QFY25, primarily due to lower Urea and DAP offtake, by 40% and 50%, majorly driven by weak farm economics, and lower urea prices.

Other sectors like Power, OMCs, Textile and Chemicals recorded decline of 44%, 23%, 19% and 15% YoY, respectively in earnings during 3QFY25. While Technology sector recovered as losses reduced to Rs511mn in 3QFY25 vs losses of Rs7.6bn in 3QFY24 due to improvement in results of TRG.

While on a sequential basis, KSE100 index earnings witnessed a decline of 6% QoQ.

For our analysis, we have taken 90 companies out of the total 100 companies (that have announced their results), which represents 97% of KSE-100 market capitalization. We estimate that adding remaining companies of Index would not materially impact profitability growth trend.

KSE 100 index companies announced cash dividend of Rs119bn, down 6% YoY in 3QFY25 compared to Rs126bn in 3QFY24.

This translates into 29% dividend payout in 3QFY25 vs. last year of 31%.

While on QoQ basis, dividend is down by 59% as most of the companies’ pay dividends at year-end/semi-annually which generally falls in Jun and/or Dec quarter.

This takes, 9MFY25 dividends to Rs493bn, up 14% with payout ratio of 39%.

Payout ratio of the E&Ps sector increased to 17% YoY in 3QFY25, compared to 11% in 3QFY24, following an improvement in cash recovery of companies due to the increase in gas prices.

Banking sector remained the largest contributor with dividend announced of Rs60.5bn in 3QFY25 followed by E&Ps (Rs15bn), and Fertilizers (Rs13bn).

Banks: United Bank (UBL) remained the largest contributor in baking sector with contribution of Rs13.4bn followed by Meezan Bank (MEBL) of Rs12.5bn and MCB Bank (MCB) of Rs10.6bn.

E&Ps: Within E&Ps sectors, Oil & Gas Development Company (OGDC) announced dividend of Rs12.9bn, followed by Pakistan Petroleum (PPL) of Rs2.7bn.

Fertilizer: In fertilizer space, Fauji Fertilizer (FFC) remained the largest contributor of Rs9.9bn followed by Engro Fertilizers (EFERT) of Rs3bn.

Automobile: Atlas Honda (ATLH) led the sector with total dividend announced at Rs5.2bn, followed by Indus Motor (INDU) of Rs3.9bn, and Sazgar (SAZEW) of Rs725mn.

Food & Personal Care: Unilever (UPFL) remained the largest contributor of Rs3.3bn followed by Rafhan Maize (RMPL) of Rs925mn.

Cement: In this sector, only Bestway cement (BWCL) declared a dividend of Rs4.7bn in 3QFY25.

Power: Pakgen Power (PKGP) announced cash dividend of Rs744mn followed by Nishat Power (NPL) of Rs708mn. No dividend was announced by Hub power (HUBC) and Kot Addu power (KAPCO) during the quarter