First quarter may be the best quarter in 2016

Dubai:

The March quarter may had been the best for 2016 even as most results came in on expected lines.

On a combined basis, UAE-listed companies registered a fall in net profit of nearly 10 per cent in the first quarter to March to be at Dh16 billion compared to the same quarter in 2015. Real estate firms posted a 13 per cent rise in net profit to clock a net profit of Dh3.5 billion, even as banks, another main sector of the economy, registered a 9.6 per cent fall in net profit to be at Dh8.99 billion.

“I think that markets were not able to surprise or put on a strong show in the first quarter,” Mohammad Ali Yasin, managing director at National Bank of Abu Dhabi said.

Insurance players witnessed a near 27 per cent fall in net profit to be at Dh297 million even as consumer staples witnessed 11 per cent lower numbers at Dh125.72 million.

Telecom majors like du and Etisalat registered a 7 per cent fall in net profit.

But investors saw the headwinds coming.

“The expectation coming in to 2016 was low. people have been alerted to the problems of low prices before the quarter and expectations for the banking sector was low because of tight liquidity,” Sanyalaksna Manibhandu, director Research, National Bank of Abu Dhabi Securities, said.

Even as far as dividends were concerned, it came on expected lines. Around Dh40 billion was paid in dividends, out of which about 40 per cent went to governments, and 25 per cent to individuals.

However, there were a few surprises. Emaar Properties, Aldar Properties and Dubai Islamic Bank registered better than expected net profit in a tough economic environment.

Best quarter

“I don’t really see a catalyst to change the numbers we saw in the first quarter in the first half, and the rest of the year. If anything I fear that first quarter was the strongest quarter for many of the companies because it was benefiting from the positive momentum of 2015,” Yasin said.

“If we look at banks and the worry about deterioration of quality of assets, that will increase and not decrease over time. The restructuring efforts that are taking place would also impact the lending appetite from individuals. I think that is not going to have impact on companies,” Yasin added.

However the silver lining may be the recovery in oil prices, which have risen nearly 70 per cent since it hit a 13-year low in mid-January.

The benefits from recovering oil prices will come with a lag, say in 2017, analysts said, even as current prices are far below some countries’ break-even point.

The break even for Saudi Arabia is about $70 (Dh257) per barrel, with Qatar’s break-even at $48.

“Companies have been successful in taking decisions to weather the weak environment and it shows these companies are well-managed despite the fact that these economies are in a weak path of economic cycle,” said Sebastien Henin, head of asset management at The National Investor.