Riyadh – Mubasher: Net income of Saudi- listed companies fell 2.1% year-on-year in the third quarter of 2016, but remained almost flat sequentially on an aggregate basis.
About 75% of the 130 companies used in the analysis registered a year-on-year decline in net profit in the first nine months of 2016, compared to 58% during FY 2015, according to Al Rajhi Capital.
Saudi companies', excluding petrochemical, banking, insurance and energy sectors, net profit was down 25% year-on-year during 9M 2016.
Most domestic oriented companies seem to have absorbed the revenue decline for now to stay in the positive earnings territory due to the historical higher margins they enjoyed.
"The recent successful issuance of Saudi dollar denominated bonds reflected the overall economic strength and confidence of larger global investor community, which is likely to help ease liquidity in the banking system and pave way for future issuances from corporates with the establishment of a sovereign yield curve," the report said.
The recent austerity measures such as the cut in allowances of some public sector employees are yet to be reflected on spending (impacting revenues) and broader economy.
Furthermore, cost side pressures are also likely to continue with further likely reduction in subsidies and increase in energy prices and increasing borrowing costs and Saudization requirements.
Additionally, new potential measures such as white land and municipal fees, and VAT will also increase revenue and cost pressures for certain companies.
