The weakening of the zloty versus the euro is expected to drive up corporate profits in Poland, prov...
The weakening of the zloty versus the euro is expected to drive up corporate profits in Poland, providing numerous opportunities, particularly in the industrial sector.
The Polish finance ministry announced third-quarter GDP growth is expected to reach close to 2% year on year, which would be the emerging market's strongest quarter so far this year.
Pawel Szymanski, analyst at SchroderSalomonSmithBarney, said the weakening local currency will particularly benefit export-led companies.
'Export sales, helped by the zloty weakening versus the euro, have been trending upwards and industrial production data published in the third quarter was more upbeat than in the preceding two quarters,' Szymanski said. 'As a result, we expect the combined net profit for our industrial universe to increase by close to 41%.'
He noted sector performance will be divergent however, even if the market direction trend is positive. Szymanski has ongoing reservations about the IT sector, seeing no trigger for top line recovery.
Banks are also looking weak, he said, and several, including Bank Pekao, posted losses in the second quarter on the back of low provisioning.
Szymanski added: 'We expect weaker results from our banking universe on a year-on-year basis. We assume a 22% decrease in net profit primarily due to higher expected provisioning at Kredyt Bank and BRE.'
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