Saudi petchems, cement and health set to outperform as Q2 earnings season kicks off

People wearing protective face masks and gloves shop at a supermarket in Riyadh. While grocery sales boomed during last year’s lockdowns, the wider retail sector continues to face headwinds. (Reuters)

RIYADH: Saudi petrochemicals, cement and health care companies are expected to be the stand out performers as second-quarter earning season gets underway, according to Al Rajhi Capital.
The Riyadh-based financial services company said the positive outlook was “driven by improving macro-economic conditions with a gradual uptick in local spending across most segments, and further supported by increased oil prices.”
The petrochemical sector is expected to be buoyed by higher product prices and sales volume.
Saudi petrochemical producers listed on the Tadawul stock exchange reported net profits of SR8.5 billion ($2.27 billion) in the first quarter, a 368.1 percent rebound from the SR3.2 billion losses over the same period in 2020, according to data from the financial information website Argaam.
Jubail-based Advanced Petrochemical helped second-quarter earnings start on a positive note when it reported record profits on Wednesday, driven by polypropylene sales.
With oil prices rising for the fourth consecutive quarter, Al Rajhi Capital expects the industry’s positive growth trajectory to continue.
The health sector is also predicted to witness strong growth over the period.
“Overall, we expect revenue of health care companies under our coverage to grow by 41 percent year-on-year, while net profit is expected to grow by 66 percent year-on-year, reflecting growth in revenue and improvement in operating efficiency,” the report said.
Cement companies will enjoy a positive period as construction increases on the back of the Kingdom’s bid to boost home ownership levels among Saudi citizens. Argaam reported that total sales of 17 Saudi cement producers rose by 65 percent year-on-year in May.
On the flip side, the retail sector is likely to still experience a tough quarter, as the economic impact of the pandemic, coupled with expats leaving the country, continue to dent sales, especially in the grocery sector.
Al Rajhi expects growth in the telecoms sector to be tepid. While travel restarted on May 17, companies have not yet benefited from any major rise in revenue from roaming. “Overall we expect moderate growth in top line for all three telecom companies,” the report predicted.
The insurance sector picture is likely to be more mixed, with the report predicting a rise in travel claims, while the motor insurance segment is expected to remain stagnant due to high competition.