Saudi Arabia’s listed companies have steadily boosted earnings from their foreign operations, with such income reaching as high as 42.5 per cent of their total earnings, a Saudi investment firm said on Sunday.
The foreign earnings are projected to rise further despite global financial upheavals as many of them are expanding output at export-oriented projects, the Riyadh-based Jadwa Investments said in a study sent to Emirates 24/7.
The combined revenues of the Kingdom’s listed companies from abroad climbed to one of their highest levels of nearly SR212 billion in 2010, more than triple the earnings of SR63 billion in 2005. The surge boosted the share of foreign revenue to 42.5 per cent last year from 29.7 per cent of total income in 2005.
“With production being ramped up at major new export-oriented projects, we think this proportion will increase further,” Jadwa said.
“The growing exposure to foreign markets is good for the Saudi companies, though it is also one reason for the tighter relationship between moves in the TASI and global stock markets and the relatively weak performance of the local market given the healthy domestic economy.”
Jadwa said its three-page report covered all listed firms over the past six years to determined their revenues from abroad, earned either by foreign sales, foreign operations or, in the case of multi-investment companies, portfolio investments in foreign countries. Virtually all companies now publish this information, though some instances included estimated data.
The report showed that between 2005 and 2010 revenues generated in foreign markets rose by an average annual rate of 30 percent.
In contrast, domestically-generated revenues grew by an average of 14 percent per year over the same period.
The study said companies in 11 of the 15 stock market sectors earn revenues from abroad, with petrochemicals generating by far the largest income.
In 2010, the sector earned SR178 billion in export revenues, accounting for nearly 84 percent of total listed company foreign revenues.
Sabic, one of the world’s largest petrochemical producing firms, contributed 86 percent of the total for the petrochemicals sector.
“This dominance emphasizes the key role petrochemicals play in earning non-oil export receipts for the Kingdom and the relative lack of other sources of foreign revenue….nonetheless, there has been a significant rise in foreign revenues from other sectors,” Jadwa said.
It showed that in 2010 they accounted for 13.1 percent of total revenues for the other 14 sectors, compared to 5.1 percent in 2005.
Telecoms ranked second, accounting for 7.8 percent of total foreign inflows in 2010, due to the revenues earned by Saudi Telecom’s foreign operations.
Only two banks reported details on their income from foreign activities and this does not include revenues from the trading of foreign securities, Jadwa said.
“We believe that some other banks generate substantial income from foreign subsidiaries and capital equipment leasing operations in foreign markets, but did not include this in our analysis,” it added.
The petrochemicals sector also tops the league of foreign revenues as a proportion of total revenues, at 75 percent last year.
“Multi-investment came next, at 45 percent, though this was as high as 80 percent in 2007, the year of the listing of Kingdom Holding, the largest company in the sector. Since then Kingdom’s revenues have declined relative to others in the sector that have less overseas investment.”
The building and construction sector has consistently earned around one third of its revenues abroad from exports and foreign subsidiaries, primarily within the region, similar factors have kept the contribution to industrial investment at around 30 percent, the report showed.
For three sectors—cement, retail and transport-- foreign revenues have fallen as a percent of the total. In each case the proportion has halved.
“For cement, this is the result of the ban on exports introduced in 2008 (although the ban has been eased, restrictions remain).”