JEDDAH – Saudi companies are expected to register mixed results in the second quarter of this year, Al Rajhi Capital said Saturday, noting that cement, food & agriculture and retail sectors were seen to post a robust set of numbers, while petrochemical companies' bottom-line growth could come under pressure due to slowing demand and declining product prices. However, standalone companies like Ma'aden, Astra and Shaker should clock decent results. "All in all, we expect a mixed bag of results from the companies" that Al Rajhi Capital covered in Q2. Saudi petrochemical companies are likely to face near-term headwinds from low petrochemical prices in Q2 2012 due to the prevailing weak demand. Further, some of the companies (Sabic, Sipchem, APC and SPC) had lowered production for maintenance during Q2, which is likely to affect the quarterly performance. "We continue to prefer diversified companies like Sabic over pure play companies like APC and SPC in the long run. We continue to like NIC, though the Q2 results may be depressed due to the recent decline in product prices of both TiO2 and petrochemicals," the report noted. Sipchem and SAFCO should benefit from their exposure to methanol and fertilizers respectively. Yet Yansab would post weak Q2 results due to its basic olefin product portfolio, the report forecast. The telecom companies were seen to generate favorable results mainly due to broadband growth and an increase in subscriber base. Mobily is expected to maintain its double digit growth while STC's net profit growth will be mainly determined by non-operating gains made through international associates. Zain is likely to achieve improved operating and net profit growth after working on its debt restructuring and thus reducing its interest cost burden. Moreover, domestic demand would further boost cement companies' growth. However, a decline in the price ceiling by ministry of commerce could affect the margins and profitability. Arabian, Yamama and Saudi Cement are forecast to post double-digit growth in net profit. Meanwhile, the food sector is seen to post decent results in Q2. After the recent weak results due to rising costs, Almarai is poised to deliver a strong performance on improving margins. Savola and Herfy are also likely to deliver another round of respectable results. Driven by high population growth rate and rising consumer spending, the retail sector will continue its strong performance. "We expect Jarir and Alhokair to benefit from the rapid growth in electronics and apparel markets while Alothaim is expected to achieve healthy same store sales." Ma'aden is seen to post a strong revenue and net profit growth, driven by the start of its phosphate business. Saudi Ceramics will remain under pressure as the outlook for the heaters segment is not promising. Shaker, on the other hand, is likely to report robust results as the company is well positioned to benefit from strong government and private AC demand. ASTRA nonetheless will log decent profits in Q2 quarter. Al Anmaa steel plant in Iraq (kick-off expected in Q4) will be the major driver for the company. – SG
