The top-performing companies of the Pakistan Stock Exchange (PSX) have registered a cumulative growth of 22% in net profit that has now reached Rs 1 trillion even with an economic slowdown and imposition of super tax in the fiscal year ended June 30, 2022.
However, the net earnings marked a significant slowdown as they had increased 55% during the last fiscal year. The slowdown in growth is primarily due to the impact of super tax, according to Topline Research Analyst Sunny Kumar.
In terms of US dollars, the after-tax profit increased 10% year-on-year to $5.6 billion whereas the pre-tax profit rose 28% to $9.9 billion in FY22.
The government, in the FY23 budget, imposed a 10% super tax on 15 specified sectors having earnings of more than Rs300 million in the tax year 2022 (FY22) with retrospective effect.
Moreover, oil marketing companies (OMCs) have shown a remarkable increase in profit in FY22 having 192% earning year-on-year, oil and gas exploration (E&P) firms, rose 30%, and refineries, up 639%.
Though profits are rising, concern remains over the quality of these earnings as a significant percentage is not cash earnings due to circular debt and piling up of receivables for companies in the energy chain, said Kumar.
Other sectors including banks, textile, and chemicals also gave major support during FY22, showing a profit growth of 3%,74%, and 17% year-on-year respectively.
In the contrary, fertilizer and power sectors registered a decrease in profits during FY22, with earnings declining 9% year-on-year each.
Despite the high profits, the dividend payout dropped by 3% year-on-year to Rs 392 billion in FY22. This is probably due to the circular debt that is affecting the cash flow of companies, Kumar stated.
E&P firms dividend remains flat despite 30% earnings growth. Similarly, banks dividend was down 12% year-on-year, he said, further elaborating We believe that adding remaining companies will not materially impact the profitability growth trend.
Meanwhile, Pakistan State Oil (PSO) remained the market leader in the OMCs sector, registering earnings of Rs86 billion against Rs 29 billion last year which was followed by Attock Petroleum with Rs 18.5 billion earnings against Rs 4.9 billion last year.
The significant jump in earnings is primarily due to inventory gains followed by higher volumetric sales, Kumar added.