JEDDAH, 19 November 2007 — The profits of the Saudi listed companies jumped to SR23.26 billion in the third quarter as compared to SR20.77 billion in the same period last year. The rise is skewed by the figures of Kingdom Holding Co., whose profits were not included in last year’s figures. For the nine months, the total profit increased by 8 percent to SR64.06 billion as compared to SR59.50 billion in the first nine months of 2006.

That is an improvement over the first and second quarter of the year and is an indication of a recovery in the corporate performance, according to a Quarterly Corporate Update 3 by Al-Rajhi Financial Services Co.

The performance by sectors and individual companies reveals a mixed picture. The combined profit of banking sector declined again in this quarter to strong numbers posted by the mega weight Saudi Basic Industries Corp. (SABIC), on back of an uptrend in the petrochemical cycle, that skewed the overall performance of the industrial sector and hence the whole market.

The inflated performance of the services sector was a result of addition of almost SR1 billion of profit of the newly listed Kingdom Holding, which was not counted in the last year’s figures. Based on the closing price of Nov. 12 and the annualized second quarter earnings, the market is quoting at a price to earnings of around 16.7. Even after the rise observed in the past two months, the valuations remain reasonable.

The report said for the fourth quarter, the direction of the market would largely depend on the companies that are able to maintain their margins and the quantum of oil money which is directed toward the capital market. Oil prices are quoting at their all-time highs, even though it is the government, which benefits the most; still some liquidity is expected to flow into the capital markets.

The new impending initial public offerings (IPOs) and some special developments or core strength could lead to an out performance.

The banking sector remains a drag on overall market. Bank profits in the third quarter of this year reached a total of SR6.30 billion as compared to SR6.80 billion at the same period of last year, a fall of 7.4 percent.

The report said Riyad Bank, which posted a growth of 10 percent in profit, would be a case in point where it was able to post positive numbers thanks to growth in the core banking. Saudi Hollandi Bank was one of the worst performers posting a negative growth of 45 percent in profit because of higher operating costs.

The share of the banking sector has been continuously falling since last few quarters and stands at 27 percent for the Q3 of 2007.

The profit for the telecom sector remained stagnant, rising a mere 0.9 percent from SR3.45 billion for the third quarter as compared to SR3.42 billion for the same quarter last year. Saudi Telecom Co. (STC) was able to contain its fall to 1.9 percent as compared to same quarter last year’s profit. Etihad Etisalat (Mobily) was able to post smart gain of 43.3 percent in profit as compared to the same quarter last year, supported by subscriber addition and value added data services. STC was unable to maintain the margins even after adding new subscribers during the quarter, because of competition unleashed by Etihad Etisalat.

The industrial sector was dominated by the performance of the petrochemicals giant SABIC. SABIC reported 37 percent increase in profit for the third quarter from SR5.4 billion to SR7.4 billion aided by higher realization from the product sale. Saudi Ceramic posted a healthy 66 percent rise in its Q3 profit because of construction boom.

The Al-Rajhi report added that investors should stay invested in core infrastructure and construction sector, which is seeing an uptrend in whole of the region.

Savola Group reported a 71 percent fall in its profit for the quarter under consideration because higher commodity prices cut into its margins of its bread and butter edible oil and sugar business.

The recovery in the services sector was broad based where 21 out of 26 listed entities posted a growth in the net profit. Aided by higher retail sales, Jarir Marketing Co. and Fawaz Abdulaziz Al-Hokair Co. recorded a Q3 net profit growth of 11 percent and 71 percent, respectively.

On the whole, the services sector reported a whopping jump of 122 percent from SR580 million in the third quarter of 2006 to SR1.29 billion for the same quarter in 2007. Real estate major, Taiba Holding Co., delivered a 822 percent gain in its third quarter profit. The company is also coming out with IPOs of its two subsidiaries to unlock the shareholders value.

The Saudi Electricity Company (SEC) posted a healthy growth of 5.6 percent on back of higher consumption, for this quarter as compared to the same quarter last year. Since power demand is an important economic indicator and signifies growth in the core economy, the company expects a 7 percent incremental growth for the next few years on account of a growth in population and economic activity.

According to the report, only two insurance companies, the National Company for Cooperative Insurance (now Tawuniya) and Malath Cooperative Insurance and Reinsurance Co., published their results for the quarter under consideration. Tawuniya recorded a quarterly profit of SR103 million, a drop of 1 percent as a result of increased competition whereas Malath posted a marginal loss. The quarter was signified by a slew of IPOs from insurance companies, as it has caught the fancy of investors. Insurance sector offers a plethora of opportunities, which is indicative of the premium at which the stocks quote.

The cement sector is undergoing a honeymoon period with the combined profit for the third quarter, for all the companies listed on Tadawul, rising a strong 29 percent at SR1.22 billion from SR944.3 million in the same quarter last year.

The agriculture sector was pulled back by the negative performance of Jazan Development Co. where the profit for the third quarter plummeted 78.5 percent from SR20.5 million to SR4.4 million. In the quarter ended September 2007, the profit for the sector was down 5 percent from SR36.6 million to 34.9 million as compared to the same quarter last year.

The Saudi stock market continued its downward trend yesterday after falling 52.53 points on Saturday. The Tadawul All-Share Index (TASI) plunged 77.22 points to 9,135.10 yesterday.

In the banking sector, shares of Riyad Bank, Bank AlJazira and Arab National Bank increased while shares of all other banks were in the red yesterday.

SABIC shares continued to suffer and fell by 2.58 percent to SR160.25 after declining 2.08 percent on Saturday.

Over SR7.98 billion worth of shares changed hands yesterday compared to SR8.38 billion on Saturday.