06 Oct 2017 - 23:59
Blockade to weigh on Almarai’s Q3 revenues
By Satish Kanady / The Peninsula
The Saudi Arabia-led blockade against Qatar is ‘taking its toll’ on the Riyadh-based Almarai. The Middle East’s leading food and beverage manufacturer’s revenue is projected to take a beating in the third quarter (Q3, 2017).
The Bahrain-headquartered investment bank SICO noted in its third quarter preview of GCC equities that “Almarai will face weakness from lower sales year-on-year as a result of Qatar blockade.”
Dairy business is the traditional core of Almarai. It’s extensive product range includes fresh milk, laban, flavoured milk, milkshakes, UHT, evaporated milk, cream, yoghurts, desserts, natural and processed cheeses, butter and ghee.
Shortly after the blockade, customers in Qatar voluntarily stopped buying Almarai’sr products. During the initial days of blockade, in Doha supermarkets, Almarai products were seen in piles labelled with discount signs.
The dairy producer relies on its Gulf neighbours for more than a quarter of its revenue, though its market share in Qatar is not available on public domain.
SICO’s Q3 preview forecast GCC banks are expected to report a healthy set of results in 3Q17. Qatari banks are likely to benefit from lower provisioning charges on a high base in 3Q16, and are likely to report healthy lending book growth supported by infusion of public sector deposits.
According to SICO analysts aggregate 3Q17 earnings of GCC listed companies are expected to increase 4 percent year-on-year and 8 percent quarter-on-quarter led by banks and industrials.
On an aggregate level, SICO forecasts, petrochemicals earnings are likely to decline by 6 percent as feedback prices outpaced the strength in product prices. Average petrochemical product prices for a basket of major products gained 14 percent YoY and 6 percent QoQ during the quarter while feedstock price increased higher .
On the GCC real estate sector, SICO forecast that the growth in property development segment revenues is expected to support YoY core earnings growth for Emaar and even Aldar. SICO analysts expects a sequential uptick in hospitality revenues.
In the building and industrials sector, the cement segment is expected to remain weak with 45 percent year-on-year decline in earnings on average. Ceramics, driven by dollar weakness, and steel companies, driven by steel price growth are likely to fare better YoY over a depressed base. Within industrials, Ma’aden should report strong YoY growth led by strength in aluminium prices and cost controls, but the growth is priced in. Saudi Electricity should see seasonal strength.
In the telecom sector, SICO expects Ooredoo to deliver better year-on-year due to forex impact in 3Q16. Saudi telcos will face year-on-year weakness.