Pandemic threatens performance of Omani listed firms

Low oil prices coupled with the COVID-19 pandemic are beginning to weigh on the performance of Oman’s publicly listed companies, albeit to varying degrees, with some sectors in particular bracing for significant impacts on revenues and profitability in the second quarter of 2020 and beyond.

According to an analysis compiled by Ubhar Capital (U-Capital), a leading Omani asset management and brokerage services firm, listed firms operating in the banking, leasing, insurance and manufacturing sectors, among other economic segments, are predicting difficult times ahead as the pandemic rages on into the second quarter. U-Capital’s analysis was based on the financial reports of MSM listed companies for Q1 2020.

Bank Muscat, the Sultanate’s biggest lender, warned that in response to the situation, it has “taken certain views in terms of credit provisions which affected the results of the quarter”. The bank has put in place specific business continuity plans and those plans were activated and enhanced as situation progressed, it noted.

Sohar International noted an increase in net impairment charge and other credit risk provisions for Q1 2020. “Increase in credit provisions includes an element of management overlay in response to expected credit deterioration due to the economic impact of COVID-19 pandemic and lower oil prices. Significant uncertainty exists in relation to potential credit impairments,” it said.

Leasing firms said they anticipated significant hardships ahead. Requests for delays in the payment of loans installments over the next six months will impact cash flows, warned Al Omaniya Financial Services.  “Expected delinquencies due to reduced cash flow at the individual and corporate borrower’s level and liquidation of major contracting companies may reduce the net margins and result in dilution of the NPA coverage,” it further cautioned.

National Finance pointed out that the projected lower levels of credit offtake combined with increased interest costs would make it “challenging to sustain current profitability levels”.  United Finance noted: “Market liquidity has tightened triggering higher interest rates resulting in borrowing costs moving up. The market continued to witness delays in settlement of contractual dues triggering an increase in delinquencies.”

Listed insurance firms warned that the pandemic was beginning to weigh on their operations, particularly the motor and medical insurance businesses. “Due to restrictions in banks and financial institutions, retail loans had come down and hence bancassurance and credit life portfolio had a negative growth,” reported Arabian Falcon Insurance.

Muscat Insurance said it was “facing an exceptional situation” due to the pandemic.  “The Board of Directors has instructed management to change the business plan in line with the efforts made to limit the developments” resulting from the pandemic, it added.