JEDDAH, 11 April 2005 — The combined net profit of 72 out of 74 listed companies rose by 45.4 percent to SR44.73 billion in 2004, from SR30.77 billion in 2003. Among the 74, newly listed Sahara Petrochemical and Etihad Etisalat have not announced their full year corporate results for 2004.
According to a Market Review and Outlook report prepared by the National Commercial Bank (NCB), the combined cash dividend payments alone are estimated to have totaled SR24.78 billion, giving an overall market average of SR9.23 per share, including outstanding shares of those companies with zero dividend payments for the year.
High profitability growth last year was generally attributed to improved product prices coupled with higher sales volumes and reduced cost of operations. The strongest performance in 2004 came from Saudi Basic Industries Corp. (SABIC), which declared a record 112 percent increase in net profit to SR14.2 billion, making it the most profitable petrochemicals firm in the world, the NCB report said.
NCB Chief Economist Dr. Said Al-Shaikh said “Profitability growth among the Saudi listed companies has been a key reason for the steamy Saudi equity market last year and during the first three months of 2005.”
The overall market index rose by 84.9 percent last year and a further 27.94 percent in the first three months of 2005, thus the Saudi market seems to be heading for a third record year in a row.
The Saudi equity market depth, measured by market capitalization as percent of nominal gross domestic product (GDP), has surpassed the size of the Saudi domestic economy by 23.3 percent on Dec. 31, 2004 and further expanded to nearly 160 percent by March 31, 2005. The aggregate market capitalization of the 74 listed companied touched a new high of SR1.47 trillion on March 31, 2005, which created an additional wealth of SR325 billion in the first three months of this year.
The value of shares traded last year reached SR1.77 trillion, which exceeded the market capitalization by 54.4 percent and the domestic economy by 90.3 percent. For the whole of 2005, the value of shares traded is expected to reach SR2.20 trillion, almost doubling the size of domestic economy, the report said.
Out of the 72 companies reporting results for 2004, nine showed losses with the combined amount of SR190.8 million, while the remaining 63 reported positive profits totaling SR44.92 billion last year. Adjusting for the losses, the overall market saw net-profit rising last year by 45.5 percent to SR44.73 billion in 2004, from SR30.77 billion in 2003.
The non-banking 65 firms reported even faster 47.3 percent growth in their combined profit of SR31.43 billion in 2004, from SR21.34 billion in the year before. Among the 72 listed firms, the net profits of SABIC and Saudi Telecom Co. (STC) together contributed nearly 52.6 percent of the combined market total net profit in 2004.
In the five-year period to 2004, net earnings of Saudi listed companies have been growing at a compound average growth rate of 29.02 percent per annum, from SR12.6 billion in 1999 to SR44.73 billion in 2004.
The overall market average price earnings multiple (PE) climbed from 18.27 on Dec.31, 1999 to 25.69 in December 2004.
Of the 72 companies declaring results in 2004, the top fifteen net profit makers together made SR40.38 billion, which accounted for nearly 90.3 percent of the total net profits reported in the same year.
STC reported a relatively slower 9.3 percent net-profitability growth to SR9.3 billion last year. The company saw an 11.7 percent growth in revenues and a slower 8.4 percent growth in the cost of goods sold in 2004.
Amongst the largest capitalized companies, the Saudi Electricity Company (SEC) reported a meager 1.6 percent positive net profit last year to SR1.43 billion compared to SR1.41 billion in the year before.
After making resource allocations for interim cash dividend payments, the combined shareholders equity of the 74 listed companies reached SR232 billion at the end of 2004, increasing by around 16 percent over 2003. This implies a net increment of SR32 billion in one year.
The NCB report said that SABIC expanded its shareholders equity base by 26.4 percent, an equivalent of SR10.6 billion to SR50.8 billion in one year to December 2004. In addition, rapidly growing STC expanded its shareholders’ equity base by 5.1 percent, an equivalent of SR1.6 billion to SR30.91 billion.
Excluding banks, being providers of loans and advances, the combined total assets of the non-bank listed companies rose by 10.7 percent to SR345 billion in 2004, from SR312 billion the year before. This represents an absolute expansion in total assets of SR33 billion in one year. Of this expansion, SR18 (54.5 percent) was attributed to the expansion in shareholders’ equity and only SR15 billion (45.5 percent) was met by borrowing.
The combined net profit of the nine listed banks rose by 41 percent to SR13.3 billion in 2004, with the largest 22 percent contribution coming from Al-Rajhi Banking and Investment Corp. as a result of a 44.1 percent growth in profits. In addition, Samba Financial Group’s profits increased by 74.4 percent to SR2.5 billion in 2004. All other banks recorded respectable double digit profitability growth in 2004.
The industrial sector, primarily dominated by SABIC, showed net-profitability growth of 107.5 percent to SR16.7 billion, compared with SR8.03 billion during same period last year.
The Saudi listed corporate sector has been making 29 percent yearly average growth in net-profit since 1999, while the non-banking companies made even faster 35.2 percent yearly growth in the same period, the report said.