Saudi Firms, Banks Earnings Plummet

Disappointing second-quarter results from large cap Saudi Arabian companies were the main drag on the local index on Sunday, while neighboring bourses were mostly weak.

The Riyadh index fell 0.8% as the largest petrochemical maker Saudi Basic Industries lost 1.3% after it reported a second-quarter net profit of 3.71 billion riyals ($989.3 million), below analysts’ estimates of 4.6 billion riyals and down by a quarter from the year ago period, CNBC reported.

The profit fall stemmed from weaker performance at its iron and steel unit, said Chief Executive Yousef al-Benyan at a press conference in Riyadh.

The drop in demand for steel was seasonal, driven by the Muslim holidays of Ramadan and Eid, Benyan said, adding the company would try to reduce expenses and increase production.

Shares in Alawwal Bank shed 4% after the country’s oldest bank reported a 40% drop in second quarter net profit to 322 million riyals. NCB Capital and EFG Hermes had forecast a bottom line of 369 million riyals and 368.6 million riyals respectively.

The bank said its operating expenses jumped 48.4% because of higher impairment charges for credit losses, depreciation and amortization, and higher rent expenses. Most other banks have reported earnings with mixed results.

The third largest telecommunications company Zain Saudi sank 5.8% to 8.83 riyals in very heavy trade after the company reported a net profit of eight million riyals, significantly below analysts’ estimate of 34.2 million riyals.

Analysts at Alrajhi Capital said that to justify Zain’s valuation at current levels—excluding Sunday’s drop—the company would need to maintain a high growth trajectory with improving margins “over and above first quarter levels.” Alrajhi’s fair value for Zain is 9.5 riyals and it has a “neutral” rating on the stock.

Shares in Saudi Cement dropped 0.6% to 50 riyals after reporting a second-quarter net income of 94 million riyals, declining by almost two-thirds from last year’s result and well below analysts’ estimate of 131 million riyals.

Shares of the largest medical insurer BUPA Arabia rose 0.3% after its net profit rose by 9% in the second quarter from the prior year period.

In the United Arab Emirates, Abu Dhabi’s index edged up 0.2% as Dana Gas, the most traded stock, swung 1.6% higher.

Dubai’s index closed near flat as 17 shares rose and 10 declined. Small cap stocks, often traded by short term speculative traders, were the top performers, with Kuwaiti based investment company Al Salam Group jumping 4.8%.