Saudi corporates blossom

Strong performance by the petrochemical sector because of higher global prices boosted the combined income of listed companies in saudi arabia by nearly 23 per cent in the fi rst quarter of 2011, according to a saudi investment fi rm.

Despite the sharp fall in the profits of some firms, the combined earnings of the more than 120 companies trading their shares in saudi arabia’s Tadawul stock exchange were also up by 13 per cent above the last quarter of 2010.

Riyadh-based Jadwa Investments described the first quarter of 2011 as a tough period for much of the private sector, which was still struggling to recover from the 2008 global downturn and a severe debt default problem that hit two family businesses in the Gulf Kingdom.

“In total, listed company net income was 23 per cent up on the first quarter of 2010 and 13 per cent above the final quarter of last year. Petrochemicals was by far the best performing sector…however, this was driven by higher prices and generally greater international sales and did not reflect local or regional conditions,” said the study.

Excluding petrochemicals, total earnings were up by just 3.7 per cent in year-on-year terms and were down by 2.3 per cent compared to the previous quarter, the first quarterly decline since the final quarter of 2009, the report showed.

Quarterly earnings for the petrochemicals sector as a whole, and for saudi arabian Basic Industries Co. (Sabic), the largest company, were at an all-time high owing to a jump in product prices.

The study showed most other sectors were impacted negatively by the regional unrest as earnings from six sectors were down in both year-on-year and quarter-on-quarter terms. among those hardest hit were companies exposed to the unrest either by owning manufacturing facilities in affected countries, or by being major exporters to those countries, particularly Egypt.

Several firms in the agriculture and food, building and construction and industrial investment sectors reported a shortfall in revenues and some noted that they were not anticipating a recovery in the short-term.

“Soaring raw material prices were cited by many companies as a key reason for elevated operating costs, which ate into profi ts,” said the report.

“Global prices of many commodities have surged and some, such as copper, hit all-time highs during the fi rst quarter. higher prices of metals and petrochemical products squeezed the earnings of companies in the industrial investment and building and construction sectors.”

It said the two largest dairy and food processors reported that rising packaging costs hit earnings and that they were also aff ected by the greater cost of imported fodder, which in part refl ects the surge in global food prices to an all-time high in the first quarter.