A mixed bag for Saudi companies in Q4 earnings

JEDDAH Earnings for Saudi equities (except financials) is expected to be largely tepid in the final quarter of 2017. Petrochemical sector profitability is likely to be mixed on a sequential basis in Q4.

Companies with fixed feedstock costs will benefit from higher product prices, while companies with market-linked raw material prices will see contraction in margins due to sharper increase in feedstock costs.

Retail sector companies under coverage will see sluggish growth compared to the same period last year due to lower consumer spending, though reinstatement of public sector salaries will have some positive impact.

Cement sector continues to grapple with low government spending, as indicated by the 8.5 percent y-o-y decline in cement sales volumes in the first two months of the quarter.

Telecom sector top line will also remain weak and focus would be on cost control. It is a seasonally strong quarter for the healthcare sector, where improving utilization of new capacities will drive top line growth. However, the primary catalyst for the sector would be receivables on the balance sheet, which could decline in Q4 as the government has announced it will clear the dues to the private sector.

Banking sector earnings are likely to rise from the low base of Q4 2016 on the back of higher NIMs and comparatively lower provisioning.