Profitability of Mena companies to climb 12.7% in the second quarter, EFG Hermes says

Egyptian and Saudi Arabian equities in Egyptian investment bank's coverage universe are expected to lead regional gains

Companies in the Middle East and North Africa covered by Egyptian investment bank EFG-Hermes are expected to record 12.7 per cent year-on-year profit growth in the second quarter. Photographer: Shawn Baldwin/Bloomberg 
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Companies in the Middle East and North Africa, covered by Egyptian investment bank EFG Hermes, are expected to record 12.7 per cent year-on-year profit growth in the second quarter led by energy firms as economies rebound with a jump in oil prices.

Egypt and Saudi Arabia are expected to lead the aggregate corporate gains among the 136 firms in the Cairo-based bank’s coverage universe, EFG Hermes said in a report ahead of second quarter earnings announcements. Egyptian telecoms and Saudi industrial entities will post the strongest growth.

“In terms of major countries under coverage, we expect the strongest year-on-year earnings growth in Egypt with 22.3 per cent and Saudi Arabia with 20.3 per cent,” EFG Hermes said.

The bank has lifted its forecast in profits for publicly-traded energy companies in the region by 381.7 per cent. Oil prices this year hit $80 a barrel, the highest level since 2014, in a boost to the hydrocarbon-rich economies of the Middle East. Last week, Opec agreed to scale back its compliance to 100 per cent as part of an agreement to boost supply after months of production curbs.


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UAE companies are expected to post 6.8 per cent year-on-year growth in the second-quarter profits led by gains in the industrial sector, which EFG Hermes said, will rise by 12.5 per cent.

The biggest increases in estimated earnings for UAE companies was led by the Commercial Bank of Dubai with an expected rise of 54 per cent in second-quarter profit, Abu Dhabi Commercial Bank with a 22 per cent increase and First Abu Dhabi Bank with 9 per cent jump, according to the report.

Ports operator DP world is forecast to see 17 per cent growth in income and Emaar Malls to record a 12 per cent rise.

RAK Ceramics is projected to post the biggest loss among UAE equities companies with a 43 per cent drop in earnings, followed by developer Damac Properties with a 33 per cent loss.

Companies in Saudi Arabia will see an aggregate 20.3 per cent growth in second-quarter income year-on-year with the biggest rise seen in the industrial sector, which is forecast to jump 433 per cent, EFG-Hermes said.

Corporations in the kingdom, the world’s biggest oil producer and the region’s largest economy, is implementing a series of social and economic reform measures to diversify its economy.

Saudi Basic Industries Corporation, the biggest publicly-listed company in the kingdom and one of the world’s top chemical producers, is expected to record a 60 per cent surge in second-quarter income compared to the same period in 2017, according to the report.

Al Rajhi Bank, which has a buy rating by EFG Hermes, is forecast to see a 10 per cent rise in profits, while dairy producer Almarai will see a 7 per cent gain. State-controlled Maaden, the Gulf’s largest mining company, is expected to post an 80 per cent advance in income.

Corporations in Kuwait will see a 6.5 per cent gain in second-quarter profits led by rise in the financial sector. However, the telecoms and consumer industries will record a 34.4 per cent and 24.5 per cent loss, respectively.

Omani companies will gain 15 per cent and Jordanian firms are projected to earn 3.3 per cent more in comparison to the same period a year earlier, the report said.