Earnings Report /
Saudi Arabia

SSP: Lowest revenues on record

  • Revenues declined -55.1% yoy (-40.6% qoq) to SAR73mn in Q2 20, the lowest revenues on record.

  • Gross loss came in at SAR12.4mn, compared to our estimate of a gross loss of SAR4.9mn.

  • Operating loss stood at SAR28.2mn in Q2 20 vs our estimates of an operating loss of SAR19.9mn.

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
6 August 2020
Published bySNB Capital

SSP reported an in-line set of Q2 20 results, with a net loss of SAR27.0mn. This compares to a net losses of SAR17.8mn in Q1 20 and SAR10.2mn in Q2 19. The loss in Q2 20 is mainly attributed to COVID-19 related lockdown. However, higher contribution from associate Global Pipes partially mitigated the loss. Adjusting for the non-recurring charges net loss would be SAR22mn.

Revenues declined -55.1% yoy (-40.6% qoq) to SAR73mn in Q2 20, the lowest revenues on record. The company stated that the decline in revenues is due to lower volumes and changes in product mix. The company’s operations were severely impacted by the lockdown during April and May. However, operations resumed to pre-COVID-19 levels from June 20.

Gross loss came-in at SAR12.4mn, compared to our estimate of a gross loss of SAR4.9mn. This compares to a gross profit of SAR4.5mn in Q1 20 and SAR0.9mn in Q2 19. Gross loss margin stood at 17.0% in Q2 20 and compares to our estimate of a gross loss margin of 9.1% and a gross profit margin of 3.7% in Q1 19.

Operating loss stood at SAR28.2mn in Q2 20 vs our estimates of an operating loss of SAR19.9mn. We believe opex came-in at SAR15.8mn in Q2 20, in-line with our estimate and higher than Q2 19 opex SAR10.5mn. The company mentioned that the higher administrative expenses is due to end of service indemnity booked in Q2 20.

Income from SSP's associate Global Pipes stood at SAR3.6mn in Q2 20, higher than our estimates of a loss of SAR5.0mn and a profit of SAR1.7mn in Q2 19. The higher associate income helped partly offset the loss, leading to in-line Q2 20 net loss.

SSP recorded a net loss of SAR27.0mn in Q2 20, in-line with our estimates of a net loss of SAR28.1mn. The results were impacted by non-recurring charges of SAR5.2mn. The company reported a receivables impairment charges pf SAR1.2mn in Q2 20. Adjusting for the non-recurring charges, net loss would be SAR22mn.

We are Neutral on SSP with a PT of SAR16.8. We believe increasing demand for pipes supported Iktivaa program is the main long-term driver. However, lower capital spending of clients, delay in project deliveries and increasing competition are the key risks.