Earnings of Saudi firms to remain weak in Q3: Al Rajhi Capital

The earnings of Saudi firms are forecast to remain weak in various sectors in Q3 2017, with the exception of the financial sector, Al Rajhi Capital said in a recent note.

Banks are expected to report strong profit for the same period, backed by higher net interest margins and flat provisions.

Petrochemical producers are likely to report profit declines on an annual basis in the third quarter, hurt by lower product spread. However, the sector’s profit is expected to improve slightly quarter-on-quarter on higher sales volume and average prices of most products.

Saudi Basic Industries Corp.’s (SABIC) Q3 profit is forecast to fall by 30 percent YoY and 1.3 percent QoQ to SAR 3.65 billion.

In the retail sector, key players are likely to see positive performance by gaining more market share from unorganized stores.

Abdullah Al Othaim Markets is expected to post a 30 percent YoY jump in Q3 net profit and 8 percent YoY rise in revenue. United Electronics Co. (eXtra) and Jarir Marketing Co. are also projected to post higher profit YoY.  

Food and agricultural firms are likely to post a drop in both revenue and profits in Q3 after a seasonally strong Q2. Forecasts are negative for all sector players on a YoY basis.

Healthcare service providers and telecom operators are expected to remain under pressure given the long holidays, Hajj season, and some expats leaving the Kingdom.

For cement producers under coverage, net earnings are projected to fall by 48 percent YoY with a 26 percent YoY drop in revenue.

“Moving forward, we do not see signs of any significant turnaround for the construction sector in the short term and expect limited demand from mega projects that are nearing completion,” the investment bank added.