Corporate Profits in 2024: Earnings Dip, Dividends Surge

Staff Report

KSE-100 index companies posted earnings of Rs 1.62 trillion in 2024, marking a 1% year-on-year (YoY) decline from Rs 1.64 trillion in 2023. In US dollar terms, profitability stood at $5.8 billion, also down 1% YoY.

Excluding Exploration & Production (E&P) companies, corporate profitability improved by 8% YoY to Rs 1.25 trillion. However, the E&P sector saw a 24% YoY decline in earnings to Rs 364 billion, primarily due to falling oil prices and reduced oil and gas production.

The banking sector recorded a 6% YoY increase in earnings, reaching Rs 593 billion, accounting for 37% of the total KSE-100 index profitability. This growth was driven by an increase in both Net Interest Income (NII) and Non-Interest Income.

The fertilizer sector experienced a significant 79% YoY jump in earnings to Rs 177 billion, contributing 11% to total KSE-100 index profitability. This growth was fueled by higher Urea and DAP prices, which rose by 39% and 9%, respectively, despite a 1% decline in Urea sales.

The cement sector’s earnings surged 30% YoY to Rs 133.5 billion, driven by higher retention prices, lower coal costs, and an efficient power mix, despite a drop in local demand.

The automobile sector showed a robust recovery, with earnings rising by 75% YoY to Rs 66.3 billion. This rebound was fueled by a 52% increase in sales volume amid declining interest rates, lower fuel prices, and improving economic activity.

The pharmaceutical sector witnessed a 3.4x YoY growth in profitability, reaching Rs 15 billion in 2024 from Rs 4.4 billion in 2023. This surge was primarily due to improved margins following the deregulation of non-essential products and lower finance costs.

Other sectors faced challenges, with Engineering, Chemicals, and Textile earnings declining by 81%, 56%, and 38% YoY, respectively. However, the Technology sector showed signs of recovery as its losses narrowed to Rs 17 billion in 2024 from Rs 24 billion in 2023.

In the fourth quarter of 2024, the KSE-100 index recorded earnings of Rs 438 billion, up 1% YoY. Excluding Banks and E&P companies, profitability saw a remarkable 40% YoY improvement.

For this analysis, 97 out of 100 KSE-100 companies were considered, representing 98% of the index’s market capitalization. The inclusion of the remaining firms would not materially impact the profitability trend.

KSE-100 index companies announced cash dividends of Rs 750 billion in 2024, reflecting a 27% YoY increase from Rs 592 billion in 2023. This resulted in a dividend payout ratio of 46%, up from 36% in the previous year.

The E&P sector’s payout ratio increased to 33% in 2024 from 19% in 2023, owing to improved cash recovery following higher gas prices.

The banking sector remained the largest dividend contributor, announcing Rs 309 billion in payouts, followed by E&P companies (Rs 121 billion) and the fertilizer sector (Rs 93 billion).

In the banking sector, United Bank Limited (UBL) led with a Rs 54 billion dividend, followed by Meezan Bank (MEBL) at Rs 50 billion and MCB Bank (MCB) at Rs 42.6 billion.

Among E&P companies, Oil & Gas Development Company (OGDC) declared the highest dividend at Rs 56 billion, followed by Pakistan Oil Fields (POL) at Rs 27 billion, Pakistan Petroleum Limited (PPL) at Rs 20.4 billion, and Mari Petroleum (MARI) at Rs 17.8 billion.

In fertilizers, Fauji Fertilizer (FFC) led with Rs 49.6 billion in dividends, followed by Engro Fertilizers (EFERT) at Rs 28.7 billion and Fatima Fertilizer (FATIMA) at Rs 14.7 billion.

The power sector saw Hub Power (HUBC) announce Rs 20.7 billion in dividends, followed by Kot Addu Power (KAPCO) at Rs 7.5 billion, Nishat Power (NPL) at Rs 3.8 billion, and Nishat Chunian Power (NCPL) at Rs 1.8 billion.

In the food and personal care sector, Unilever (UPFL) declared Rs 11.9 billion in dividends, while Nestlé Pakistan (NESTLE) announced Rs 7.5 billion.

The automobile sector was led by Indus Motor (INDU) with Rs 12 billion in dividends, followed by Millat Tractors (MTL) at Rs 8.6 billion, Atlas Honda (ATLH) at Rs 7.6 billion, and Sazgar (SAZEW) at Rs 2.4 billion.

The cement sector saw Bestway Cement (BWCL) declare Rs 17.9 billion in dividends, followed by Lucky Cement (LUCK) at Rs 4.3 billion, Pioneer Cement (PIOC) at Rs 3.4 billion, Fauji Cement (FCCL) at Rs 2.4 billion, and Cherat Cement (CHCC) at Rs 1.06 billion.