By Mohammed Abu Meleeh

Riyadh-Mubasher: The third-quarter earnings of petrochemical industry and telecom sectors will likely decline by 33.2% and 3.9% year-on-year, respectively, NCB Capital (NCBC) said in a recent report.   

For the stocks under coverage, Q3 net income is expected to fall 12.3% year-on-year and 1.0% quarter-on-quarter to SAR 23.2 billion.

“We expect SABIC’s net income to decrease 34.3% y-o-y to SAR 4.1 billion in Q3, mainly due to lower petrochemical prices. On a q-o-q basis , SABIC’s net income is seen dropping 34.2% on lower prices and declining margins,” NCBC said.

It added that the key reasons for the expected profit decline is the 33.2% y-o-y fall in net income for the petrochemical sector to SAR 6.1 billion and the 77% decrease in earnings of real estate sector to SAR 224 million, due to the CPO gains of Taiba in Q3-14.

The research firm attributed the potential profit fall of telecom sector to a 9.6% y-o-y decline in STC’s net income on the back of higher overall expenses and losses from investments under equity method. Meanwhile, Mobily’s net profit will likely increase 89.3% y-o-y to SAR 245 million.

The report issuer expects the food sector’s Q3 earnings to fall 1.9% compared with the same period a year ago. Savola’s net profit would decline 25.6%, given the weakness in food segment as well as higher expenses associated with aggressive Pandati store openings. However, a strong Ramadan as well as margin expansion on lower commodity prices are expected to support Q3 earnings at Almarai that is seen reporting a 20.4% profit growth to SAR 649.4 million.

“For Retail, we expect earnings to increase 10.3% to SAR 687 million. Despite the lower extended impact of the two-month salary bonus and potential indirect impact on organic growth from weak oil prices, we expect Saudisation led increase in overall average salaries to support spending,” NCBC said.

It added that higher store openings remain the key growth drivers for covered stocks. “However, we expect a 19.5% decline in net profit for eXtra on the back of lower footprint and operational weakness,” it added.

Translated by Abdul Maguid Aboshahla