Saudi businesses foresee profits in Q1 of this year

A majority of businesses in Saudi Arabia foresee profits in the first quarter of 2009, a business analysis firm said in its latest report.

While 61 per cent of the businessmen expected a rise in profits in the third quarter, 59 of them see a net increase in the volume of sales, according to a Dun and Bradstreet (D&B) survey.

The respondents belonged to the non-oil and gas sector. Even though the crisis has largely brought down the cost of raw materials the world over, most of the businesses in Saudi Arabia expressed "rising cost of raw materials" as their major business concern D&B said.

"The BOI survey shows that backed by high sales and profit expectations, 41 per cent of companies polled have said that expenditure on business expansion will be their leading investment outlay during the next quarter. An additional 46 per cent of business units also plan to invest in technology and machinery, signalling that the Saudi Arabian business community has got strength to withstand the short term turbulence in the global economy," Rajesh Mirchandani, CEO of D&B South Asia and Middle East said.

This is the second business optimism index (BOI) of a GCC country that D&B has released in the span of a fortnight. It had also termed business indicators for Qatar as positive in a recent report. The two reports come close on the heels of announcements from several GCC businesses that they have not been left completely untouched from the crisis. Saudi Arabia recently presented a deficit budget for the first time in years.

The BOI survey for Q1 2009 was conducted in November 2008 amidst a global economic slowdown.

D&B has termed almost all the economic indicators for Saudi Arabia as positive. The New Jersey-based firm said that the domestic demand levels are expected to remain robust in the oil rich nation and this "will help in minimising the impact of external shocks to a great extent".

In the hydrocarbon sector as well, 55 per cent of the business units are expecting an increase in the profits, the report said.

The services sector, consisting of financial, insurance, real estate and other business services firms, is most optimistic about managing the fallout of the crisis, D&B said. While 51 per cent of companies anticipate some impact of the financial crisis on their business, 41 per cent feel that their companies will not face the brunt of the financial upheaval.

The BOI also indicates some concerns among the business units regarding prices of raw material, availability of skilled labour, competition besides other issues. 59 per cent of the business units cite rising prices of raw materials as their biggest business concern, D&B said.

The BOI survey indicate that there are signs of easing inflationary pressure.

"The global economic slowdown has caused food and commodity prices to retreat, and the BOI survey indicates that almost a third of businesses in the non-hydrocarbon sector expect their selling prices to fall, and 35 per cent do not expect any change in the level of their selling prices. Expectations indicate that we will see a very gradual easing of inflationary pressure in the next quarter" according to Said Al Shaikh, the chief economist at the National Commercial Bank of Saudi Arabia.

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