Earnings season at PSX fails to spark investor interest

LAHORE: Earnings season at the Pakistan Stock Exchange (PSX) has somewhat failed to spark investor interest mainly on the back of political uncertainty in the country. Despite various companies registering strong earnings, indices at Pakistan Stock Exchange (PSX) kicked off the week with a slow start.

In the cement sector, Kohat Cement (KOHC) announced its 3QFY18 result where the company reported earnings of Rs652 million, declaring earnings of Rs4.2 per share, broadly in-line with street expectations. While revenues remained almost flat, the decline in earnings was attributable to 7 percentage point (ppts) contraction in margins to 28 per cent on the back of lower local net retention prices.

Moreover, Abbot Laboratories (ABOT) announced its financial results for 1Q2018, where the company reported earnings of Rs620 million, while its earnings per share were down 12 per cent YoY to Rs 6.3, mainly owing to higher distribution expenses which soared 35 per cent YoY to Rs1.2 billion. While pre-tax earnings were down 5 per cent YoY during the outgoing quarter, higher effective tax rate, up 5.4 ppts to 31 per cent exacerbated the decline in profitability.

Adamjee Insurance Company (AICL) announced 1Q2018 consolidated earnings of Rs659.7 million, registering its EPS at Rs1.9 down 3.3 per cent. While net insurance claim of the company grew by 16.5 per cent to Rs5.6 billion, 66 per cent increase in ‘net change in policyholder liabilities’ to Rs2.2 billion and 21 per cent decline in investment income to Rs538 million contracted profitability.

Berger Paints Pakistan (BERG) also announced its consolidated 3QFY18 result where the company reported earnings of Rs8 million with an EPS of Rs0.4, down an eye-watering 78 per cent YoY. While revenues grew by ~15 per cent to Rs1.4 billion but a 5.6ppts contraction in margins to 23.7 per cent eroded the company’s profitability.

Hi-Tech Lubricants (HTL) announced consolidated 3QFY18 result where the company reported earnings of Rs120 million (EPS Rs1.03), down considerably by 53 per cent YoY. While gross margins improved by 439bps to 33 per cent and a 29 per cent decline in revenues led to lower profitability.

Meanwhile, Fauji Foods (FFL) announced its financial results for 1Q2018, reporting a loss of Rs618 million declaring a loss per share of Rs1.17 against a loss of Rs447 million and LPS of Rs2.55, better than market projections. This was primarily on the back of improvement in margins which were up from 0.4 per cent in 1Q2017 to 8.9 per cent in 1Q2018.

Continuing the losing streak, Gillette Pakistan reported losses worth at Rs234.485 million from Rs17.980 million last year declaring an LPS of Rs12.261 against an EPS of Rs0.94 during the nine months ending March 2017.

Moreover, on the expenses front, Gillette Pakistan reported a mammoth 3815.72 per cent increase in other operating expenses in addition to an excruciating 43064 per cent in bank charges the outgoing nine months, from Rs14,000 to Rs6.04 million.

While talking to Pakistan Today, Capital Stake Director Research Maha Jafer Butt said “PSX has had a turbulent ride for a while now. Uncertain political environment ahead of the elections, worrying macroeconomic indicators, depleting reserves are a few possible reasons for investors cautious behaviour.”

Pak Kuwait Investment Assistant Vice President Adnan Sheikh told Pakistan Today, Earnings aside investors are more focused on politics. He added, as for earnings one has to look at sector specifics, most of March quarter earnings are already priced in.

He went on to say, the banking sector’s earnings are broadly declining in the Q1, due to pension costs, provisions and lower to no capital gains recorded across the sector, but future earnings are expected to improve given interest rate hikes.

Eleazar Bhatti
The writer currently serves as the Content Manager at Profit by Pakistan Today and is an economics graduate from Leeds Business School in the UK. He can be reached at [email protected] or at twitter.com/eleazarbhatti.
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