KARACHI—Pakistan Corporate Sector Profits Increase 21% in 4QFY25 with a flourish as KSE-100 index companies’ profitability increased 21% year-on-year (YoY) to Rs445 billion from Rs366 billion in the same quarter last year. The performance amidst patchy industry performance and ongoing macroeconomic issues says much for the strength of Pakistan’s listed corporates.
Quarterly aggregate profitability on a dollar basis stood at approximately US$1.6 billion. Benchmark performers for the whole financial year posted aggregate earnings of Rs1.7 trillion, a credible 3% YoY growth. Combined earnings, excluding banking and E&P, increased a staggering 13% YoY — a reflection of the vibrancy of non-conventional businesses in an Economy slowly returning to the growth path.
Banking Sector Leads the Way
While policy rates declined in the quarter, the banking space remained the biggest contributor to quarterly profits, with a robust 24% YoY growth to Rs160 billion in 4QFY25. The advance was led mainly by higher net interest income (NII), improved non-markup income, and capital gains.
Large banks like United Bank Limited (UBL), Standard Chartered Bank Pakistan (SCBPL), and Meezan Bank (MEBL) were large payers of dividends, offloading Rs20 billion, Rs13.5 billion, and Rs12.5 billion, respectively.
Energy Sector Under Pressure
The E&P segment reported earnings falling 6% YoY to Rs83 billion during the quarter, pulled down by lower hydrocarbon production amidst gas curtailment. Oil and gas output declined 15% and 10% YoY respectively, while average international crude oil prices were US$68.61 per barrel versus US$87.36 earlier.
On the corporate front, Mari Energies (MARI) posted the largest dividend of Rs26 billion, followed by Oil & Gas Development Company (OGDC) with Rs21.5 billion, Pakistan Oilfields (POL) with Rs14 billion, and Pakistan Petroleum Limited (PPL) with Rs6.8 billion.
Cement Sector Shines with Record Profits
The cement industry was one of the best performers of the top quartile, achieving a whopping 79% YoY increase in profits at Rs42.3 billion. Strong industry expansion was led by increased levels of exports, solid tenant rents, declining soft coal prices, and diminishing finance costs as a result of monetary easing.
The major contributors were Bestway Cement (BWCL) that took the lead with dividend of Rs5.9 billion, Fauji Cement (FCCL) at Rs3.1 billion and Lucky Cement (LUCK) at Rs1.2 billion.
Auto Sector Continues Recovery
The auto industry also grew moderately with the profits rising 2% YoY to Rs17.8 billion in the quarter, leading bottom-line growth for the year to 29%.Strong industry expansion was led by increased levels of exports, solid tenant rents, declining soft coal prices, and diminishing finance costs as a result of monetary easing.
Passenger car volumes increased 57% YoY in the quarter, though profitability for the industry was subdued on account of sluggish sales of tractors.
Indus Motor Company (INDU) remained the highest dividend distributor in value of Rs3.9 billion, followed by Millat Tractors (MTL) of Rs2.9 billion and Sazgar Engineering (SAZEW) of Rs1.2 billion.
Consumer and Pharma Sectors Show Healthy Gains
Improved macroeconomic conditions, such as a reduction in inflation and lower interest rates, favoring the food and personal care segment, whose bottom line rose by 11% YoY to Rs15.2 billion.
Nestle Pakistan (NESTLE) led the industry’s dividend payout at Rs10.1 billion, followed by Unilever Pakistan (UPFL) and National Foods (NATF) at Rs2.8 billion and Rs1.1 billion, respectively.
While that, the pharma sector was the surprise champion, recording a spectacular 72% YoY increase in quarterly profit led by the effect of deregulation as well as price reforms. In FY25, profitability of the sector has increased by 87% YoY. Quarterly dividend amounted to Rs3.3 billion, dominated by GlaxoSmithKline (GLAXO), Haleon Pakistan (HALEON), and AGP Limited (AGP), paying Rs1.5 billion, Rs1.2 billion, and Rs560 million respectively.
Fertilizers Dip but Post High Cash Flows
The fertilizer sector posted a soft 4% YoY decline in profits to Rs36 billion mainly due to higher selling prices of DAP fertilizers. On a sequential quarter-on-quarter basis, however, the earnings were up by 8% sequentially due to seasonality as well as improved offtake.
Dividend distributions held steady at Rs30 billion. Fauji Fertilizer Company (FFC) led the way at Rs17 billion, while Engro Fertilizers (EFERT) stood at Rs7.4 billion and Fatima Fertilizer (FATIMA) was at Rs7 billion.
Mixed Performance in Other Sectors
Excluding the big three industries, Power, Refinery, and Chemical industries recorded earnings declines of 48%, 84%, and 86% YoY, respectively, reflecting operating challenges and margin squeezes. OMCs and Textiles recorded earnings expansion of 51% and 30% YoY, respectively, while Technology sector narrowed its losses to Rs1.7 billion in 4QFY25 from Rs13.2 billion for the same quarter last year.
Dividend Momentum Sustained Despite Decline in Payout Ratio
The KSE-100 index shares collectively paid out Rs272 billion during 4QFY25, a 7% year-on-year increase from Rs254 billion in the same period last year. That represented a 61% payout level, down slightly from 69% last year.
Quarter-on-quarter, dividends rose 142% — as to be expected from the season of year-end payments.
For the year as a whole, total dividends were Rs775 billion, up 13% YoY and with a payout level of 45%.
Large dividend-paying industries were headed by sector leaders in banks with Rs87 billion in payouts during the quarter, followed by E&Ps (Rs69 billion) and fertilizers (Rs30 billion). The power industry, driven by Hub Power Company (HUBCO), added Rs12.9 billion in dividends.
Outlook: Broad-Based Strength Ahead
Analysis represents 91 of the 100 KSE-listed firms — 97% of capitalization — and indicates that inclusion of the remaining firms is not expected to significantly alter the trend of total growth.
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Corporate profitability rose 9% quarter-to-quarter during the quarter, as improvement in most sectors.
The experts are of the opinion that this pace of earnings could be carried forward to FY26 too once the economy stabilizes even further based on softer interest rates, stable policy regime, and better investor sentiment.
