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Kuwait listed companies report decline 1st half of '16 - NBK

Kuwait listed companies report decline 1st half of '16 - NBK
KUWAIT, Aug 23 (KUNA) -- Kuwait's publicly listed companies reported a decline in earnings for the first half of 2016, reflecting a notable deterioration in corporate performance, a monthly brief report by the National Bank of Kuwait (NBK) said Tuesday.
"The decline in oil prices, by dampening sentiment, could be weighing on bottom lines, even as the domestic economy appears to be weathering the low price environment relatively well, nonoil growth in 2016 is around 4-5 percent by our estimates," said the report.
The report noted that "softness pervaded most sectors but was most pronounced, no surprise, in nonbank financial services and real estate." "The disappointing earnings results," the report added, "did little to help equity performance in recent weeks, as Kuwaiti stock prices continued to underperform regional markets." "Earnings of listed corporates declined by 9.1 percent year-on-year (y/y) compared to the year before," the report highlighted.
The aggregate profits of 151 reporting companies, out of a total of 173 Kuwaiti companies listed on the Kuwait Stock Exchange (KSE), declined to KD 782 million in first half of 2016.
Profit growth would still show a 6.7 percent y/y decline even after making an adjustment for a large one-time gain recorded in 1Q15 by one of the banks.
The decline in the first half of 2016 was slightly more pronounced than that reported for first quarter 2016.
Also, total reported losses rose to KD 34 million, an increase of 62 percent y/y.
The number of loss-making companies increased to 34 from 30.
Real estate companies contributed most to the decline in total profits as sector earnings declined by more than a third.
The earnings of 35 real estate companies were down by 36 percent y/y.
This has coincided with a sharp decrease in activity in the real estate market, where the value of sales was down by a notable 23 percent y/y in first half of 2016.
Fourteen companies suffered aggregate losses of KD 8.7 million, more than double the figure in first half of 2015.
Thirteen companies reported decline in their profits compared to a year before.
The non-bank financial services sector was also a main contributor to weakness.
The poor performance of Kuwait and regional equities early on in 2016 appeared to weigh on the portfolios of investment companies.
As a result, eleven companies in the sector suffered aggregate losses of KD 16.2 million.
Ten companies saw their profits decline compared to first half of 2015. With 18 of the sector's companies yet to announce results, losses for the sector are likely to be worse.
Banks also helped pull earnings down as profits dropped by 4.3 percent y/y, though the decline was largely due to a one-time event.
If the large gain on an asset sale reported in first quarter of 2015 is excluded, bank profits would show a small increase of two percent y/y.
Individual bank results were more mixed, with some registering double-digit growth just as others saw notable deterioration.
Nonetheless, banks continued to show resilience given the current environment and concerns in Kuwait and the region that economic growth might be moderating.
Indeed, asset growth remained relatively healthy despite some slowdown, while asset quality continued to improve.
Even the consumer goods and services sectors, which tend to be more resilient, showed signs of softening.
Profits of the sectors were flat and only half of the companies saw rises in profits.
This coincided with some softness in the consumer sector as a whole, with moderating growth in consumer spending, led by underperforming sales of larger ticket items and durable goods.
Meanwhile, results in other sectors were hardly more impressive.
Telecom companies, the second largest contributor to corporate earnings, continued to face a challenging environment as intense competition from within the sector and from non-traditional providers ate into profit margins.
While total profits for the sector were up by 3.8 percent, this was mainly on the back of a bounce from foreign exchange losses incurred last year.
Technology and oil and gas sectors saw strong growth driven by gains at a few companies.
Both sectors remain too small to have any significant impact on the aggregates.
The impact of profit announcements on stock prices was relatively muted.
The KSE continued to be driven by international factors, especially oil prices, interest rates and international markets.
As of August 17th, the KSE value-weighted index was up a mere 0.4 percent quarter-to-date (qtd) and continued to underperform regional markets. (end) fz.mb