Strategy Note /
Saudi Arabia

TASI earnings decline by 8.5% yoy

    Iyad Khalid Ghulam
    Iyad Khalid Ghulam

    Head of Equity Research

    Mohamed Tomalieh
    Nauman Khan
    SNB Capital
    20 May 2019
    Published by

    In Q1 19, the TASI net income declined by 8.5% yoy (+43.1% qoq) to SAR23.4bn. The yoy decline is mainly due to a 40.0% yoy decline in petrochemicals, increased losses in utilities and a 31.2% yoy decline in healthcare profits. This was partially mitigated by higher profits in banks (+12.7% yoy), telecoms (+21.9% yoy), food and beverage (+35.9% yoy), and cement (+61.9% yoy). The yoy decline in the petrochemical sector was due to weak prices and lower spreads, while banks benefited from NIM expansion. SABIC earnings declined 38.1% yoy (+5.2% qoq) to SAR3.4bn.

    Total net profit for the listed companies declined by 8.5% yoy to SAR23.4bn in Q1 19. The decline was primarily attributed to lower profits from the petrochemical and healthcare sectors, and higher losses in utilities. This was partially offset by higher profits in banks, telecoms, food and beverage, and cement sectors.

    The petrochemical sector’s net income declined by 40.0% yoy to SAR4.9bn in Q1 19. Weak earnings were mainly due to lower prices and weak margins. SABIC reported a net income of SAR3.4bn, down 38.1% yoy (+5.2% qoq).

    The banking sector's net income grew by 12.7% yoy to SAR14.1bn (+15.3% qoq). The strong yoy performance was driven by c30bps NIM expansion while earnings assets grew 6.1% yoy to SAR735bn.

    Food and beverage sector's earnings were supported by Savola’s return to profitability in Q1 19 versus losses last year, while the cement sector benefited from better selling prices and higher sales volumes.