Saudi firms post lower profits as downturn bites

SAUDI SLOWS: Profit growth in the kingdom has slowed due to a fall in oil prices and the global economic crisis. (Getty Images.

Saudi Arabian companies posted lower profit margins in the fourth quarter of last year as they began to feel the impact of lower oil prices and the economic slowdown, a report from Global Investment House (GIH) has revealed.

Overall profitability in the kingdom decreased by 7.6 percent in 2008 compared with the corresponding period last year, excluding losses registered by Kingdom Holding and newly listed, non operational insurance stocks.

Kingdom Holding’s net losses for the financial year 2008 stood at $8.0 billion compared to a profit of $0.3 billion in 2007.

“The slump in crude oil prices during the fourth quarter totally reversed the outlook for petrochemical sector,” a team of GIH analysts wrote in a research note

The falling price of crude has also hit the profitability of large players like Saudi Basic Industries Coporation, Saudi Arabian Fertilizers Company adn SIPCHEM.

GIH said that in addition to the fall in oil prices, the international economic downturn had led to a decline in the demand for various petrochemical products, metals and, more specifically, steel.

The Saudi banking sector remained an attractive destination for financial institutions worldwide, the bank said.

Saudi banks had escaped the effects of the global financial crisis in the third quarter due to limited exposure to the global financial markets, but fourth quarter results weighed on full year earnings, it added.

“Although fourth quarter banking results reflected some dampening effects mainly due to setting aside of higher financial allocations in consideration to market conditions, the overall good asset quality of the Saudi banking sector is maintained with well provisioned banks’ balance sheets,” GIH said.

The cement sector witnessed a decline in profitability in 2008 mainly due to a ban on exports which was imposed in June amid strong local demand.

This was exacerbated by the slowdown in the real estate sector that followed, the report said.

The banking and petrochemical sectors made up 65 percent of Saudi Arabia’s total corporate profitability last year, compared with 64 percent in 2007, shows data compiled by the Kuwaiti investment bank.

The sector that witnessed the highest profitability drop was the multi-investment sector, followed by the insurance and food sectors.

The industrial investment sector witnessed the largest increase in profitability, followed by the construction and hospitality sectors, the report concluded.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM