The 2022 full year reporting season is now in full swing, with the MSX listed companies all reporting preliminary (pre-audited) results. Only Omantel is yet to report, as they need to wait for the results of their subsidiary in Kuwait (so the below chart displays Omantel’s 3Q results).
Overall, we can witness an improvement in most sectors as the financial challenges from the Covid pandemic were replaced by a generally positive impact for Oman from the ongoing conflict between Russia and the Ukraine that has provided a stimulus to oil prices, on which a large proportion of the Oman economy is either directly or indirectly heavily dependent.
In the Financial sector, we see the banks and leasing companies posting improved performance, primarily as a result of lower loan impairment charges, in addition to improved net interest income. However, both of these drivers face potential headwinds, as the success of major loan restructures will only become apparent in 2023 and borrowing costs are projected to rise to reflect the global increase in borrowing costs following the US Fed decision to continually hike interest rates to arrest the rise in inflation. The insurance companies have not had such an easy life.
Although their performance is flat, this masks the fact that increased returns from investment portfolios have compensated for poor returns from core insurance business, as they are finding it challenging to deliver premium income growth in the current operating environment, combined with increasing costs for re-insurance. The improvement in the other category is due to a combination of DIDIC that benefited from the strong performance of it associate Bank Dhofar and from Ominvest that posted a profit of RO 49 million compared to just RO 29 million in the prior year, similarly as a result of the strong performance of its subsidiaries and associates.
The Industrial sector, comprising of construction and manufacturing companies posted mixed results.
In the lackluster construction sector, with little sign of major new contracts, the majority of companies have posted deteriorating results but the big story of the sector lies with Raysut Cement that was forced by the CMA to reconstitute its Board and restate its Q3 results, culminating in full year losses of RO 90 million, compared to losses of RO 14 million in the prior year.
The manufacturing companies have exhibited a very mixed story with those escaping high input costs (such as Gulf Mushrooms, Oman Cables, Oman Chromite and Oman Chlorine) posting substantial profit increases, contrasting with those companies that rely heavily on imports that had to grapple with the challenge of higher imported raw materials prices brought about by the conflict between Russia and the Ukraine. Oman Flour Mills were also detrimentally affected, with increases in wheat prices reducing profits to RO 2.3 million compared to RO 4.7 million in the prior year.
Finally, as we look at the Service sector, the major story is the continuous rebound from the Covid pandemic by Omantel, including its overseas operations in Kuwait. Within the oil and gas sector, the ending of lockdowns and car owners returning to the highways was a boost to the three petrol station owners.
Although not a major sector for listed companies, the six hotels within the tourism sector are still waiting to see the return of mass tourism and increased business demand and any hopes for positive effects from Fifa World Cup in Qatar simply did not reach the shores of Oman. The year-on-year performance boost in the energy sector came about entirely from Sohar Power that recorded losses of only RO 3 million, down from prior year losses RO 35 million when it wrote down its plant and machinery following the annulment of the Power 2022 procurement process by the OPWP and which offset the reduced performance (also due to OPWP actions) by Barka Water and Power that saw prior year profits of RO 9 million dissolve into losses of RO 2 million in the current year.
[This article by Karl Jackson, an Audit and Assurance Partner with Crowe Oman (karl.jackson@crowe.om), is based on financial data published by the Muscat Stock Exchange]
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