Saudi Q3 corporate income at 3-year high

Surge was mainly in petrochemicals and real estate as telecom and insurance tumble

A sharp rise in petrochemical and real estate earnings boosted the combined income of Saudi listed companies to their highest level in nearly three years despite a plunge in the telecommunications and insurance sector.

The income soared by around 22.3 per cent to around SR26 billion ($6.9 billion) in the third quarter of 2011 compared with the same period of 2010, its highest level since the second quarter of 2008, the Riyadh-based Jadwa Investments said in a study sent to Emirates 24/7.

Excluding the petrochemical sector, the consolidated net income of the listed firms grew by only about 1.8 per cent, the report showed.

“This was the highest net income level recorded since the second quarter of 2008 and was heavily dependent on the petrochemicals sector,” it said.

The report showed petrochemical earnings hit an all-time high in the third quarter and were up by 66 per cent in year-on-year terms.

This was largely due to higher product prices, supported by elevated production, particularly from Yansab and Sipchem.

Despite the weakening of the global economy in the third quarter, there appears to have been little impact on volumes sold, Jadwa said.

Sabic’s profits were another record and the company accounted for nearly 73 per cent of total earnings for the sector. Outside of petrochemicals performance was much weaker, though this was distorted by the telecoms sector.

The report showed telecoms recorded the largest year-on-year decline in profits since the sector was liberalized mainly as a result of Saudi Telecoms (STC) posting a foreign exchange loss of SR789 million.

STC has operations in India, Malaysia, Indonesia, Turkey, Kuwait and Bahrain and was affected by large exchange rate movements, the report said.

Ten of the remaining thirteen sectors recorded year-on-year profit growth in the third quarter and 113 of the 147 listed companies posted positive growth, compared to 115 in the second quarter, according to Jadwa.

Profit growth was fastest for the real estate sector, up by 81 per cent, it said, adding that the gains were concentrated in two firms, Emaar Economic City, which is now selling housing units and has restructured its construction costs, and Taiba, which received a one-time payment for a land transaction in Medina.

Profits for the building and construction sector rose by over 30 percent, supported by strong demand and rising prices for building materials stemming from high construction spending, the report showed.

Banks’ profits surged by 29 per cent mainly because of lower provisioning for bad debts although lending continued to pick up.

“Insurance was the worst performing sector, with profits falling by 53 percent. The insurance sector has been hit by provisioning for bad debts in line with a SAMA policy that was implemented at the start of the year.”

The report showed transport was the second worst performer owing to a sharp drop in profits at National Shipping. It attributed this to greater global shipping capacity reducing fees, higher fuel costs and the expiration of some contracts.

A breakdown for all listed sectors showed year-on-year positive change stood at 80.8 per cent in real estate, 66.4 per cent in petrochemicals, 31.3 per cent in construction, 29.3 per cent in banking, 27.4 per cent in hotels, 26.8 per cent in cement, 24.5 per cent in multi investment firms, 21.5 per cent in retail, 7.5 per cent in agriculture, 4.1 per cent in media and 1.7 per cent in industry.

Negative change (decline) stood at 53.5 per cent in insurance, 41.1 per cent in telecom, 45 per cent in transport, and 6.1 per cent in energy.