Topline Pakistan Research has highlighted the corporate profitability in Pakistan for the fourth quarter of FY25. Earnings increased by 21%, while dividends grew by 7% year-on-year (YoY), according to analysts. Companies listed on the KSE-100 index reported earnings of Rs445 billion in 4QFY25, up from Rs366 billion in 4QFY24, marking a 21% YoY increase. In US dollar terms, profitability reached approximately US$1.6 billion. For the entire FY25, benchmark index companies generated earnings of Rs1.7 trillion, reflecting a 3% YoY growth. Excluding exploration and production (E&P) companies and banks, profits increased by 13% YoY.

– Despite a decline in interest rates, the banking sector’s earnings rose by 24% YoY to Rs160 billion in 4QFY25. This growth was largely driven by an increase in Net Interest Income (NII) and non-markup income, aided by capital gains.

– In contrast, the E&P sector saw a 6% YoY decline in profitability for 4QFY25, reporting earnings of Rs83 billion. This decline was primarily due to lower hydrocarbon output as a result of gas curtailment, with oil and gas production decreasing by 15% and 10% YoY, respectively. The situation was exacerbated by weaker oil prices, which averaged US$68.61 per barrel in 4QFY25, compared to US$87.36 per barrel in 4QFY24.

– The cement sector experienced significant growth, with profitability surging by 79% YoY to Rs42.3 billion in 4QFY25. This growth was fueled by higher cement export volumes, increased retention prices, falling coal prices, reduced finance costs due to monetary easing, and a more efficient fuel and power mix.

– The automobile sector continued its recovery in 4QFY25, with profitability rising by 2% YoY to Rs17.8 billion, resulting in a 29% YoY increase for FY25. Despite a 57% YoY increase in passenger car sales during the quarter, growth in profitability remained modest due to a decline in tractor sales.

– The food and personal care sector reported an 11% YoY increase in profitability during the quarter, reaching Rs15.2 billion, mainly due to a decrease in inflation and interest rates.

– The pharmaceutical sector experienced a remarkable 72% YoY increase in earnings during 4QFY25, reflecting the full-year impact of deregulation, which resulted in an 87% YoY rise in profitability for FY25.

– Conversely, the fertilizer sector saw a 4% YoY decline in earnings, totaling Rs36 billion during the quarter, primarily due to higher selling costs associated with di-ammonium phosphate (DAP). However, compared to the previous quarter, earnings increased by 8% due to seasonality and higher offtake.

– Other sectors reported substantial declines in earnings: Power, refinery, and chemicals reported falls of 48%, 84%, and 86% YoY, respectively, during 4QFY25. Conversely, oil marketing companies (OMCs) and textiles each posted increases of 51% and 30% YoY, while the technology sector also showed improvement, with losses reducing to Rs1.7 billion in 4QFY25 compared to Rs13.2 billion in 4QFY24.

– Sequentially, KSE-100 index earnings grew by 9% quarter-on-quarter (QoQ).

– For our analysis, we considered 91 out of the total 100 companies that announced their results, which represent 97% of the KSE-100’s market capitalization. We believe that including the remaining companies would not significantly alter the profitability growth trend.

– KSE-100 index companies declared cash dividends of Rs272 billion in 4QFY25, up 7% YoY from Rs254 billion in 4QFY24. This translates into a 61% dividend payout in 4QFY25, compared to 69% in the same period the previous year. On a QoQ basis, dividends increased by 142%, following the typical year-end pattern of companies declaring payouts. This brings total dividends for FY25 to Rs775 billion, representing a 13% increase with a payout ratio of 45%.

– The banking sector was the largest contributor, announcing dividends of Rs87 billion in 4QFY25, followed by E&P companies at Rs69 billion and fertilizers at Rs30 billion.

– In the banking sector, United Bank Limited (UBL), Standard Chartered Bank (SCBPL), and Meezan Bank (MEBL) were the top contributors, with payouts of Rs20 billion, Rs13.5 billion, and Rs12.5 billion, respectively.

– Within the E&P sector, Mari Energies (MARI) announced the largest dividend of Rs26 billion, followed by Oil & Gas Development Company (OGDC) with Rs21.5 billion, Pakistan Oil Fields (POL) with Rs14 billion, and Pakistan Petroleum (PPL) with Rs6.8 billion.

– In the fertilizer sector, Fauji Fertilizer (FFC) declared the largest payout of Rs17 billion, while Fatima Fertilizer (FATIMA) announced Rs7 billion and Engro Fertilizers (EFERT) declared Rs7.4 billion.

– The automobile sector was led by Indus Motor (INDU) with Rs3.9 billion in dividends, followed by Millat Tractors (MTL) at Rs2.9 billion, and Sazgar (SAZEW) at Rs1.2 billion.

– In the food and personal care sector, Nestlé Pakistan (NESTLE) emerged as the largest contributor with Rs10.1 billion, while Unilever (UPFL) and National Foods (NATF) declared dividends of Rs2.8 billion and Rs1.1 billion, respectively.

– Bestway Cement (BWCL) announced Rs5.9 billion in dividends, followed by Fauji Cement (FCCL) at Rs3.1 billion and Lucky Cement (LUCK) at Rs1.2 billion within the cement sector.

– Within the power sector, Hub Power Company (HUBCO) declared the highest dividend of Rs12.9 billion during the quarter.

– Unlike the typical nil payout in the June quarter, the pharmaceutical sector announced Rs3.3 billion in dividends, with GlaxoSmithKline (GLAXO), Haleon Pakistan (HALEON), and AGP Ltd. (AGP) paying Rs1.5 billion, Rs1.2 billion, and Rs560 million, respectively.