Earnings rise modestly in Q2FY26: Corporate dividend payouts record strong growth
KARACHI: Corporate profitability of companies listed on the Pakistan Stock Exchange posted modest growth in the second quarter of FY26, while dividend payouts recorded a strong increase, reflecting improved cash flows and shareholder returns despite pressure in key sectors, according to a report by Topline Research.
Aggregate earnings of KSE-100 index companies stood at Rs456 billion in 2QFY26, up 3 percent year-on-year compared to Rs443 billion in the same period last year. In dollar terms, profitability was reported at approximately $1.6 billion. Excluding the banking and exploration and production (E&P) sectors, earnings growth was significantly stronger at 15 percent YoY.
Cumulatively, profitability for the first half of FY26 reached Rs919 billion, up 7 percent YoY, while on a sequential basis earnings declined marginally by 1 percent compared to the previous quarter.
The banking sector, the largest contributor to index earnings, saw profits decline 3 percent YoY and 9 percent QoQ to Rs148.9 billion in 2QFY26. The decline was attributed to lower non-interest income amid reduced capital gains, along with higher operating expenses on a sequential basis.
Similarly, the E&P sector posted a 15 percent YoY and 7 percent QoQ decline in profitability to Rs74.2 billion, mainly due to lower gas production and a decline in crude oil prices.
The fertilizer sector recorded a 12 percent YoY decline in earnings to Rs43.1 billion, primarily due to margin compression driven by higher discounts offered during the period.
Cement sector profitability also dipped 3 percent YoY to Rs45.4 billion due to lower retention prices and reduced other income. However, on a quarter-on-quarter basis, earnings improved by 8 percent, supported by a 13 percent increase in domestic dispatches. In contrast, the automobile sector delivered strong performance, with earnings rising 36 percent YoY and 9 percent QoQ, driven by a 39 percent YoY increase in passenger car sales amid new variant launches and improving purchasing power.
The pharmaceutical sector also posted robust growth, with earnings increasing 61 percent YoY and 42 percent QoQ, supported by a sharp decline in global active pharmaceutical ingredient (API) costs and lower financial charges.
The food and personal care sector witnessed a significant jump in profitability, rising 3.6 times YoY to Rs28.6 billion, largely due to one-off gains by National Foods Limited.
Among other sectors, power and textile companies recorded strong earnings growth of 249 percent and 64 percent YoY, respectively, while technology, oil marketing companies (OMCs), and chemical sectors posted declines of 48 percent, 41 percent, and 25 percent YoY, respectively.
The KSE-100 companies announced total cash dividends of Rs308 billion in 2QFY26, reflecting a 12 percent increase compared to Rs275 billion in the same period last year. The growth was primarily driven by a large payout from National Bank of Pakistan.
The payout ratio rose to 67 percent in 2QFY26 from 62 percent a year earlier, while on a sequential basis dividends more than doubled, in line with the typical half-yearly and annual payout cycle.
The banking sector remained the largest contributor with Rs168 billion in payouts, followed by E&P companies at Rs41 billion and fertilizer firms at Rs23 billion.
Within banks, National Bank of Pakistan led with Rs74.5 billion, followed by United Bank Limited (Rs20.0 billion), Meezan Bank (Rs12.5 billion), and MCB Bank (Rs10.7 billion).
In the E&P sector, Oil and Gas Development Company announced Rs18.3 billion, followed by Mari Energies Limited (Rs9.9 billion), Pakistan Oilfields Limited (Rs7.8 billion), and Pakistan Petroleum Limited (Rs5.4 billion).
In fertilizers, Fauji Fertilizer Company announced Rs12.1 billion, while Engro Fertilizers Limited and Fatima Fertilizer Company declared Rs5.3 billion and Rs5.2 billion, respectively.
Commenting on the results, Sania Irfan of Topline Research said that overall earnings growth remained “moderate due to weakness in key sectors such as banking and E&P, while non-cyclical and select sectors continued to show resilience.”
She noted that “strong dividend payouts, particularly from the banking sector, have supported investor returns despite mixed profitability trends across sectors.”
The analysis, based on 97 companies representing 99.5 percent of KSE-100 market capitalization, suggests that while overall earnings growth remains contained, sectoral divergence is becoming more pronounced.
Analysts expect future performance to remain sensitive to interest rate trends, commodity prices, and macroeconomic stability, with dividends continuing to play a key role in sustaining market sentiment.
Copyright Business Recorder, 2026