But an expected turnaround in profits in the fourth quarter could more than offset that decline to end the year with higher earnings although there will be a drop in corporate income on an individual basis, Markaz Centre said in a study.
The study covered 58 per cent of the nearly 485 companies listed on the stock markets of the six Gulf Co-operation Council (GCC) countries, including banks, petrochemicals, real estate, telecommunications, industry and other sectors.
"With 58 per cent of the companies declaring results so far, the aggregate results show a negative growth of 23 per cent for the GCC as a whole for the third quarter of this year," Markaz said in the 35-page study on GCC corporate performance.
"Visibility for nine months is strong for Saudi Arabia, Qatar and the UAE… as a whole, the GCC is all set to post a flat year of bottom line growth in 2009."
Its figures showed the combined income of those companies could slightly grow by 1.9 per cent to $ 37.722 billion (Dh138.5bn) in 2009 from $ 37.005bn in 2008.
The income is expected to be sharply lower than the peak earnings of 2007, when GCC-listed firms netted $ 65.775bn. It will also be far lower than the 2006 and 2005 profits of $ 49.251bn and $ 47.017bn respectively.
A breakdown showed the projected income for the whole of 2009 will decline by around 32 per cent in the UAE, three per cent in Bahrain and two per cent in Qatar. But it will swell by 26 per cent in Saudi Arabia and one per cent in Oman.
In Kuwait, the net earnings of listed firms are forecast to skyrocket by 536 per cent this year following their worst results in the fourth quarter of 2008. "The visibility is very poor for Kuwait with only 20 per cent of companies reporting their Q3 earnings so far. With the extent of earnings already available till date, the annualised figures show a flat growth for 2009," Markaz said.
But the study noted there is an improvement on a sequential basis for Saudi Arabia, with Q3 earnings growing by eight per cent on a y-o-y basis in comparison to the second quarter of 2009.
"Similarly Q2 was higher by 53 per cent and Q1 was a turnaround. This is expected to impact the overall earnings direction for 2009 positively for the GCC. The improvement in Kuwait’s overall corporate earnings looks very good primarily due to a complete washout during 2008."
According to the study, among the companies that have announced their results so far, Sabic of Saudi Arabia posted a 79 per cent decline in its 9M09 earnings on a y-o-y basis. Similarly, Industries Qatar too suffered from a drop of 47per cent. "Both these companies have been negatively impacted by the fall in commodity prices on a y-o-y basis. On a y-o-y basis, due to the revival in commodity prices from its lows in Q408, there has been an improvement in earnings on a sequential basis," the report said.
As for banks, they have recorded some stability, it said, adding 81 per cent of listed banks in the GCC have declared their results so far. It showed that the 9M09 earnings growth for those banks on an aggregate have shown a 12 per cent drop in net income compared to a 97 per cent plunge in net earnings in Q408 on a y-o-y basis.
"Our expectations are that 2009 will be almost equivalent to 2008 in terms of net earnings for the region’s companies," said Zuhair Kiswani, Director of the Sharjah-based Al Sharhan Investment and Stockbrokerage firm.
"The reason is that banks have chopped off a large part of their income for bad debt allocations while there was a sharp fall in the real estate sector in some GCC countries.
There is no doubt performance in the fourth quarter of this year will be much better than the fourth quarter of 2008. But don’t forget banks and other companies were at their peak in most of 2008 before the crisis."
On an individual basis, the report showed Saudi Arabia posted a 46 per cent decline in earnings in 2008. This was mainly due to a $ 6.3bn loss in Q408. On a 9M basis, the aggregate earnings for Saudi Arabia dipped by 36 per cent.
"If the 9M earnings are annualised, thereby assuming that Q409 will be a turnaround as compared to Q408, a 26 per cent growth in earnings can be expected for the full year 2009."
Kuwait posted the lowest earnings among the GCC countries in 2008 due to a $ 8.8bn loss on an aggregate in Q4 2008. Financial services companies alone posted an aggregate of $ 5.7bn loss in Q4 2008. "There seems to be a marked recovery in earnings on a sequential basis."
In the UAE, earnings for 2008 were at $ 14bn, a seven per cent decline from 2007 levels. For 2009, annualising the results of almost 70 per cent of the companies that have come out with their 9M earnings so far indicates a total profit for the UAE at $ 7.5bn.
"This can be mainly attributed to the decline in banking earnings. Q309 bank earnings have witnessed a drop of 47 per cent."
According to Markaz, Qatar was the only country to post a positive growth in 2008 of around 31 per cent. In 2009, the annualised nine months earnings of all companies in Qatar show a two per cent decline in earnings. "For 9M09, the overall earnings in Qatar have fallen by 13 per cent on a y-o-y basis."
Oman earnings declined by 14 per cent in 2008 mainly because of a 80 per cent drop in profits from financial services companies in 2008.
In 2009, 13 financial services companies have so far announced their results and the aggregate earnings show an increase of nearly two per cent. "The overall earnings on an annualised basis show a growth of one per cent for 2009."
Bahrain was the second worst performing market in terms of earnings in 2008 after Kuwait, according to the report.
The overall earnings in Bahrain declined by 62 per cent in 2008. "For 2009, the scenario continues to look bleak with significant losses in financial services companies. Annualised earnings show a decline of three per cent."
