This autumn brought joy for investors as the companies’ earnings spiked and directors continued to approve handsome dividends. Together with the booming stock market that continues to propel stock prices upwards, it went on to enrich stockholders.

As the quarterly results season draws to an end, the profitability of KSE-100 index companies for the nine months (Jan-Sept) amounts to Rs136.1bn, up 4.9pc over the profit after tax (PAT) at Rs129.9bn in the corresponding three quarters of 2015.

Research analysts of the consensus that the corporate sector was set to show the strongest combined after tax profit growth, of 16pc in 2016, after two years of flattish earnings.

The assessment of analysts could differ according to the corporate ‘universe’ they cover. However, there is little doubt that the growth in corporate profitability has brought all round cheers

The rupee liquidity in the hands of the general public gave them a greater purchasing power and created an increase in demand, mainly of fast moving consumer goods (FMCGs), while low interest rates combined to drive up companies’ earnings.

The highly leveraged firms managed to show a marked decline in financial charges as they could prevail upon banks to re-profile costly debts in the declining interest rates scenario. It was a blessing that helped to boost their bottom lines.

The textile sector stood out as the biggest profit earner in the nine months ended Sept 30, representing an earnings growth of 265pc over the corresponding period of the previous year (YoY). Oil marketing companies (OMCs) posted a 94pc upsurge in earnings over the same period last year, followed by chemicals profits up by 20pc; cement 10pc and power generation 7pc.

On quarter-on-quarter (QoQ) basis, autos and cement also fared well with a 7pc profit growth taking the YoY earnings increase of the cement sector to 10pc. With positive results in the last quarter, autos managed to trim their YoY profit decline to 20pc. The poorest performer on both QoQ and YoY basis was the Telecom sector that saw profits fade away by 24pc and 89pc respectively.

According to figures compiled by Shahbaz Ashraf, head of research at brokerage firm Arif Habib Limited, commercial banks, which have the highest weight of 23.7pc in the KSE-100 index, contributed the largest share of profit amounting to Rs43.4bn in the latest nine months (9MFY16).

The fertiliser sector with the second highest weight of 11.9pc earned a net profit of Rs14.9bn and oil and gas exploration companies with the third highest weight of 11pc in the index chipped in earnings of Rs19.7bn.

“The banking sector, which has been a star performer lately, recorded a profitability growth of 5% QoQ.” analysts said. The ‘Performance review by State Bank of Pakistan’ released on Nov 01, improved the performance of the sector.

“The banking industry grew by 16.1pc during FY16 despite experiencing some pressure on its profits due to declining interest rates and spreads. However, the outlook remains stable with high solvency levels, a strong capital base, contained non-performing loans and improving risk management systems”, the SBP report stated and mentioned the outreach of the Islamic banking industry, which expanded considerably, with branch network increasing to 2,146 branches in 98 districts across the country.

Analyst Nauman Khan at Foundation Securities posited that in the three-quarters 2016, there was sharp earnings divergence particularly in the big five sectors: Banks, E&P, Fertiliser, Cement and Power.

Fertiliser earnings saw recovery in earnings, mainly due to normalised volumetric sales. The analyst thought that banks had started to feel the pinch of lower interest rates and spread.

Slump in oil prices took its toll on the E&P companies, though a reduction in exploration activity helped to overcome the trend of earnings attrition. Inter-market Securities analyst Muhammad Saad Ali observed that after two quarters of declines, companies posted 9pc YoY earnings growth across July-Sept, led by higher profits in cements, fertilisers and OMCs.

The assessment of analysts could differ according to the corporate ‘universe’ they cover. However, there is little doubt that the growth in corporate profitability has brought all round cheers. The government is happy for it owns about a half of the equity market and higher dividends from corporate entities help it, in part, to fill the hole in fiscal deficit.

Most listed multinational companies continue to do a roaring business in Pakistan and are able to repatriate profit and dividends to their overseas holding companies.

But for all that, many people who have little or nothing to do with stocks and listed companies’ earnings complain that corporate prosperity has done little to boost the economy or to create more jobs.

“The companies continue to cut expenses to the bone and make existing employees work even harder, adding more names on the payrolls has remained elusive,” an economist contended.

But many others hold the criticism as unjustified. “Gruelling competition among the growing number of companies, low interest rates and the slump in international oil prices have all gone to lower prices of goods to the benefit of the general public”, says one detractor.

Published in Dawn, Business & Finance weekly, November 14th, 2016