LAHORE - Corporate profitability reported a decline of 3 per cent over 1Q2008 on the back of steep commodity price reversal, stable oil prices, improved liquidity and high rupee depreciation, helping cement, refineries, power and fertilizer sector to post profitability in double digits, experts said. They added that higher NPLs and financial charges have deteriorated Banks and OMCs profitability. The JS Capital Market in view of analyzing the corporate profitability included 40 companies in its sample, representing 75 per cent of the total market capitalization of KSE 100 Index. And these companies total profits reported at Rs54 billion or $676 million in 1Q2009 against Rs55 billion or $885 million in the corresponding period last year, which also excluded a one time gain booked by Packages on account of its Tetrapak share sell-off. Analysts in the report revealed that refineries, power, fertilizer and cement sectors were major earning drivers during 1Q2009. Cement sector booked a hefty profit growth of 28 per cent on the back of high local and export retention prices. Power sector also posted a significant growth of 47% on account of rupee depreciation and production bonuses. Fertilizer sector growth of 25% was due to higher urea prices and better DAP off-take. Moreover, higher margins on non-energy products such as lubricants & asphalt were the major reasons behind robust earnings of the refinery sector. Though banks performance was better than expected, yet they depicted a decline of 11% amid recognition of impairment losses, higher non performing loans and declining advances. Moreover, oil & gas marketing recorded a 50% earning drop primarily on account of higher financial charges. On the back of stable macro-economic environment, declining interest rates expectation and higher PSDP, experts forecast 20 per cent earnings growth in FY10. They recommended investors to opt for defensive stocks as they offer higher dividend yield and shield to macro economic shocks. Their top picks are OGDC, PPL, POL, FFC and PTC. Meanwhile, Federal Bureau of Statistics (FBS) reported a dismal production data at -20%YoY for March 2009, the highest in the last decade. Experts believe lower exports and slow domestic demand had led the steep decline. Additionally, frequent power breakdowns, higher tariffs and interest rate and bad law and order situation have distracted the production number. With 20 per cent decline in March, FBS reported a 7.67% decline in overall production during 9MFY09. Given the dismal trade numbers and decent inflation statistics, analysts believe substantial policy action would be required from policy makers to boost the confidence of the industrial sector.