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$5bn wiped off earnings of GCC companies

GCC companies have posted billions of dollars of losses for the fourth quarter of 2008, Kuwait Financial Centre (Markaz) revealed on Wednesday, as it warned that the first quarter of 2009 could prove even more “problematic”, especially for the bank and real estate sectors.

Forty percent of GCC companies have reported fourth-quarter earnings for 2008, revealing an overall loss of $5 billion so far, a new report by Markaz showed.
Over the same period in 2007, company earnings posted a positive figure of $9 billion.

While 85 percent of Saudi companies have released their fourth-quarter results, only 12 out of a total of 183 Kuwaiti companies, or seven percent, have announced earnings, the Markaz report shows.

Mandagolathur Raghu, head of research at Markaz, explained that the reason behind this divergence was the fact that Kuwaiti companies were awaiting further clarification over the financial sector government rescue plan approved last week.

Raghu said that two Saudi companies – namely Sabic and Kingdom Holdings - had “skewed the whole picture”.

Sabic reported a 95 percent drop on fourth-quarter earnings, while Kingdom Holdings reported a massive quarterly loss of $8.2 billion.

He added that this was not a reflection of the Saudi economy, however, since both these companies operated globally and were hit by the international turmoil.

The GCC financial services sector came under major pressure during the quarter, declining by about 64 percent.

Although real estate sector earnings for the fourth quarter were down by 37 percent, the annual growth was actually 41 percent, indicating an extremely strong performance during the first three quarters of 2008.

Raghu said that he expected the first quarter of this year to be “a real problematic quarter” for companies, as the world awaited policy changes.

“If government spending slows down, then you are going to see a major business contraction,” he added.

He said a rebound could come in the third or fourth quarter of this year.

But Raghu expects GCC financial and real estate sectors to be hit hard during the whole of 2009.

“We expect certain sectors, such as banks and real estate, to fall very steeply,” he said. "These will not only be worse in Q1, but the whole of 2009 in my view."

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