KARACHI: Notwithstanding the nearly flat economic growth expected for 2022-23 amid record-high inflation, after-tax income reported by the representative firms of the country’s corporate sector remained at Rs877.6 billion in the first nine months of the current fiscal year, up 8.8 per cent from a year ago.

According to data compiled by Arif Habib Ltd, combined earnings rose 12.7pc year-on-year in the latest quarter (January-March) to Rs353bn. The overall increase in net income from the preceding three-month period was 30.3pc.

The analysis is based on the corporate results of 89 of the top 100 listed companies representing 93.1pc of the stock market’s capitalisation.

“Barring the impact of super tax, growth could have been higher since profit-before-tax jumped 19.6pc year-on-year in January-March and 15.7pc year-on-year in July-March,” it said.

The nine-month earnings figure was caused by a 43pc increase in the index-heavy commercial banking sector, whose profitability rose to Rs303bn. That was mainly on the back of a sharp increase in the policy rate, which is the benchmark with which banks peg a substantial part of their loan book.

Growth in their net income would’ve been even higher had it not been affected by the super tax. That’s evident from the pre-tax earnings growth rate of 53.6pc.

The other index heavyweight sector that contributed significantly to corporate profitability was oil and gas exploration. Earnings of the companies belonging to this sector rose 49.2pc year-on-year to Rs312bn in the nine months. Reasons for the sharp rise in income were higher oil prices and exchange-rate gains booked amid the rupee’s depreciation.

The cement sector also posted a jump of 27.4pc in its collective nine-month earnings to Rs27.6bn. This was because of higher retention prices and the use of cheaper coal from Afghan and local markets, offsetting the impacts of the 18pc volumetric decline, energy tariff hikes and depreciation.

Another major contributor to the bottom-line growth of the corporate sector in 2022-23 so far has been the chemical sector. Its earnings rose 43.1pc year-on-year due to a one-off gain booked by Lucky Core Industries Ltd on the sale of NutriCo Morinaga. Excluding this one-off gain, the sector’s profitability would’ve declined 10pc year-on-year, the brokerage house’s research showed.

Sectors that remained laggards in the first nine months of 2022-23 were fertiliser whose earnings dropped 13.9pc year-on-year to Rs63bn primarily due to dismal results by Fauji Fertiliser Bin Qasim Ltd amid exchange rate and inventory losses alongside the sector-wide impact of super tax.

A drop of 73.5pc in the earnings of the oil and gas marketing sector to Rs20bn in July-March was partly because of massive inventory losses. The power sector posted a loss after tax of Rs1.9bn in the nine-month as K-Electric Ltd posted a heavy loss during the period.

The steel/engineering sector came under pressure as margins were slashed due to issues in the opening of letters of credit, high input (scrap) prices, depreciation, rising energy tariffs and surging borrowing costs. As a result, the erosion in the sector-wide net profit was 56.6pc year-on-year to Rs4.2bn in July-March.

The refinery sector’s earnings dropped 6.5pc year-on-year to Rs7.5bn in July-March owing to a massive loss posted by Cnergyico PK Ltd during the period. Meanwhile, the automobile sector posted a loss after tax of Rs7.7bn as auto firms continued to struggle amid import restrictions and demand erosion.

Published in Dawn, May 2nd, 2023